I sit today on Mandela Day reflecting on the remarkably dramatic and most violent events of the past week attempting to make sense of these tumultuous events as I provide guidance to my clients, friends, and family. Madiba would undoubtedly have turned in his grave at these events all of which flew in the face of the policies and principles that he espoused and lived by.
I have split this narrative into four sections viz the good news, the bad news, advice for the president and advice for business owners and professionals.
The Good News:
We, as acknowledged by the President, were the victims of a very poorly executed insurgency, not one to overthrow the government but rather one to recapture the ruling party. This was an effort, by those threatened by the imposition of the laws of a constitutional democracy as evidenced by the jailing of the ex-president. They clearly saw the writing on the wall for themselves post the ruling party’s NEC last Saturday on two fronts. Firstly, the eviction of targeted and implicated members would mean losing the largesse that they have enjoyed since 2009 and secondly the fact that the payback would hit them criminally as well. So, they played their final card to unleash the dogs of hell onto an unsuspecting and seemingly defenseless public.
This had nothing to do with the jailing or early release of the ex-president. We are the only nation on the planet that sing and dance when we are angry! Not a single note, song, dance move or toyi-toyi about the ex-president was in evidence during these days as seen in the voluminous videos shared. The ex-presidents name was not sung by a single person and it was clear that the inciting of looting was orchestrated, and we know by whom. It was large scale mass looting by the poor and in many cases opportunistically by the middle class judging by the cars involved.
The looting was largely peaceful which is remarkable and efforts to instigate a race war between polarized neighborhoods largely failed. Security force restraint, where by omission or commission, avoided what could easily have been another Marikana times a hundred. This was orchestrated by dozens and not thousands and is not a well-funded insurgency machine. The attempts to damage strategic infrastructure largely failed and the burning of shops, malls and vehicles is easily repaired in months and not years. The destruction on the other hand, had it happened in a worst-case scenario, of pipelines, airports, power stations, harbors and refineries would have thrown us back by more than a decade. The Rand barely moved during this unique and unprecedented event meaning that most of the risk has already been factored in and that current investors are in it for the long haul although there will undoubtedly be longer term repercussions on capital flows.
So, in summary the good news is that the insurgency failed, we know who did it, it is not linked to the ex-president’s jailing, this is actually not a coup, damage was limited, there is no armed wing, it is mainly about posturing and threats, it is a criminal act and not a political one, minimal lives were lost, the country pulled together to clean up and protect as well as to aid each other post the event and no race war has been started. It is in effect the last desperate kicks of a dying buffalo and their relevance has now lapsed allowing the country to move forward while consolidating the power behind the president’s broadly supported change programme.
The Bad News
The weak actions of the security forces and the lack of a cohesive response by a divided, and in many cases, weakened government is of grave concern should this occur again, which it very well might given the relative ease of this orchestrated looting. Our reputation as an investment destination is shot, the rule of law has been undermined on a grand scale, criminals elements act with impunity, a reliance on the taxi industry for security services was concerning, the over exuberance of private militia was evident, price gouging of the poor has commenced, we have lost dozens of Billions of Rands in infrastructure and merchandise, many small black owned businesses were ruined, race tensions ran high and I could go on for another paragraph. We have a nation that is in the trauma ward emotionally and both personal and business confidence is at an all-time low. The coming together of communities is what we do as a nation because we are very resilient as a people but is no cause for celebration. You cannot celebrate the fire brigade putting out the fire every day. The fires must stop, and the habitual arsonists must be jailed or convinced to turn to less fiery pursuits.
The use of social media in a reckless and targeted fashion has not been halted and will continue to present an existential crisis to the country and to these platforms in the longer term. They act as hate amplifiers during a crisis and this was utilized, and still is, by the insurgents to disastrous effect. The root causes of the looting have not been addressed and the insurgents, while they remain at large, remain a clear and present danger.
A week after the crisis began its clear that the civil service is not mobilized to assist but that civic organizations are. This speaks to the fact that the ability of the administration to achieve anything significant is alarmingly weak. Delays in the application of justice merely make this worse. This is of concerning in addressing the root causes of disillusionment in the country, a large portion of which are home made. The weak service delivery, crime wave, state corruption, weak security services, confused and ineffective policies, collapsing health care and schooling system and all public services in effect cannot be addressed by the very party that caused this. The COVID impact emerging, from what is effectively, a hyper spreader event is yet to be assessed.
My Advice to the President
Never waste a good crisis as the saying goes. The president finds himself in a particularly powerful position after these events. He has ridden the COVID crisis and made the opposition irrelevant. The vaccine rollout is gathering pace and should produce the same results as seen internationally where 99.2% of fatalities are amongst the unvaccinated. This is being achieved in a public private partnership which is a great model to leverage for the future. I would argue that this should be encouraged across all arms of governments as a model for how to get things done, an endemic problem in the administration as previously outlined.
This is a heaven-sent opportunity for the ruling party to rid itself of those guilty of state capture, resize and restructure the cabinet and set the entire country on a new direction. Anything else would condemn us to living this nightmare again. We have paid a severe price this last week and it will have been in vain if the surgical and decisive actions are not taken immediately. Any sign of weakness or a deviation from the path of law and order will be seized on to prolong the crisis so a pardon under pressure for the ex-president would be ill advised.
The president missed the mood when he spoke of the covid lockdown extension while the country was burning. The TV screens projected these extremes with hilarity, and this can’t be allowed to happen again. The president needs to demonstrate that he is in touch with the people. He also needs to build an intelligence service that lives up to those words. There is clearly a need for a complete restructure of the security and intelligence cluster.
We were on our knees macro-economically as a nation coming into this week due to the COVID impact and now lie with our faces in the dirt. He is going to need to create a coalition of the willing to turn the country around. This will include civic associations, the opposition, unions, religious organizations, business both big and small and the individual taxpayers. Committing to a path of delivery and upliftment and reiterating the principles of Madiba while ensuring growth at grass roots are the only possible outcome. I would suggest a CODESA style forum to be held urgently where all parties meet to plot a path forward. There is sufficient common ground now. The taxi associations protected malls because that is the reason for their existence. They move people there for shopping and work and take them home with their purchased goods. Destroy the mall and there is no taxi industry. Simple. We have these interrelations throughout the country that must now be leveraged in a virtuous circle.
A crisis committee of leading minds in the country should be formed to inform and advise cabinet. South Africa had one of the largest home construction programmes in the world with the much-maligned RDP houses in the 1990’s. Its time to replicate that with the largest job creation programme in the world. The great brains in this country, much smarter than the author, know how. The president needs to send a strong message of enough and no more. That this behavior will be addressed more vigorously in future and that stolen goods must be returned. The president must ask community leaders to step forward and push this agenda.
My Advice to Business
How should business leaders be thinking about their business plans for the next 12 months? In a nutshell my advice is no surprise- Brace yourself for tough times ahead. As with any crisis there will be winners and losers. Whiners and Climbers. Some sectors will boom in this crisis including the engineering, construction, and private security services. There will be some replacement of transport equipment destroyed of course. There will be a big growth in the uptake of business insurance although all insurance in the country will become more expensive. The tsunami of claims will impact short term results for these firms.
Perversely GDP will grow in the short term as both inventory and infrastructure will be replaced. But confidence has been destroyed so insipid growth is likely for the next year. Raising funds offshore will be expensive as our risk premium rises. Most of the hot money has fled so the Rand should still be stable to the extent that global macroeconomics are.
Many businesses are not coming back and even some of the malls will be left in ruins. Those that are rebuilt will feature infrastructure light designs and be de-risked by featuring higher physical barriers, tighter access control, lower stock levels, more click and collect services (especially for electronic goods which have a high value / weight ratio), greater security staff, more non-lethal mitigations, lower cost shop fittings, improved firefighting equipment, etc. Expect far more decentralization with smaller units and smaller, closer and less formal community markets with lower rentals and less infrastructure that are the norm in most of Africa. These smaller businesses will be owned by members from the communities themselves.
There will be a reassessment of the over centralization of services and infrastructure. Expect to see lower inventory held and it being more distributed. Factories will improve security and will deliver directly to stores which will also be smaller in size. Lower costs products will be held. Consumers will be even more reticent to physically go to malls and so ecommerce with their courier services for last mile delivery should get a solid second wind with more exponential growth. The rollout of internet and broadband services into lower income areas will accelerate exponentially too to support this. Sales of electronic products would drop due to the large-scale looting that has already happened. Fashion will move to more secondhand clothing and perhaps clothing rental for occasion wear.
Banks will be very ill advised to replace damaged ATM’s going forward. The time to demonetize the economy of cash is now and the combination of mobile wallets and debit cards are the obvious solution. So, make it cheap and broadly accessible. The only people using large volumes of cash going forward should be those avoiding tax or engaged in illicit activities. This has been the experience across Africa and should have arrived here by now but for the entrenched behavior of cards, ATMs and cash. This is a great incentive to move behaviors fast. The end of CIT heists and ATM theft beckons!
Unemployment will unfortunately accelerate after this as will consumer spending especially on durable goods. Sales will crash due to a lack of inventory anyway. More expensive transport will arise due to vehicles travelling in convoys and travelling with armed escorts. This will be compounded by much higher inflation as stock shortages impact and the damage to both factories and the inbound logistics system creates downstream effects. Unfortunately, most of this will impact the poor the hardest. A price of bread in Alex went from R26 a loaf to R64 once transport costs are factored in. Expect the state to intervene to manage prices down to avoid triggering food riots in the future.
Government deficit will rise even further as new budget items are created to support communities and businesses and to rebuild some damaged state infrastructure. More financial relief will be needed, and the state will be moving closer to one of the largest UBI programmes in the world. The much-mooted Universal Basic Income is closer to realization in SA than anywhere else globally.
Expect much tighter scrutiny of social media and a tightening up of the rules for access and use. More content filtering and monitoring will occur as we better manage the mass transmittal of fake news and incitement to violence. Greater penalties will be applicable and the platforms themselves will come under pressure due to litigation.
In closing
I am sure that there will be the usual rush for the exits as many families go through the perennial wave of emigration after every crisis in SA. I am not going anywhere. I could make a living anywhere in the world but chose to remain in SA to make a difference. I am cautiously optimistic that we are through the worst of this and that although the road is upward from here it is a far brighter one than we have seen thus far. The positives outweigh the negatives going forward. It was always going to be this way. As we saw in the events in Moscow in 1991 when the hardliners made a last desperate stand and tanks fired into the Duma, the national assembly. The Russian people rose to defend democracy. Now it may not have gone well since as they would have hoped but our dynamics are much better than theirs were.
Having fought this good fight so far, I feel that we have survived the worst and emerge leaner and meaner without the malevolent elements engaging in mass bleeding of the fiscus. We more united and ready to compromise and innovate for a greater South Africa to bring to life the long-held dream of a multi-cultural non-racial Democratic South Africa and a better life for all. We cannot fail. We are the grand experiment for the world. Let us demonstrate to the world how our united Mzansi tribe can build a better model for humanity.