State owned enterprises are vital to many economies, but are particularly vital to those seeking economic development.
This is true in South Africa too. Which makes it odd that the South African government – and much of the policy debate – never sees any value in trying to work out what role they should play in growth and development.
Finance Minister Malusi Gigaba’s interest in selling off government shares in telecommunications group Telkom, to bail out South African Airways is the latest example of a trend in which state owned enterprises are seen as useful pawns in government plans but not as national assets whose use should be thought through carefully.
The importance of South African state owned enterprises was spelled out in a 2015 Organisation for Economic Cooperation and Development policy brief. It estimated that their revenues correspond to 8.7% of the country’s gross domestic product. They also, it found, play a vital role in providing services:
The population’s access to water, electricity, sanitation and transportation is almost entirely dependent on the state, operating through corporate vehicles. They are concentrated in strategic sectors – infrastructure, transport, energy and water – and are “among the main sources of employment” in cities.
The Organisation for Economic Cooperation and Development might also have mentioned that State owned enterprises are also a key source of racial change. According to the 2016/17 report of the Commission for Employment Equity, black people occupy just under 75% of top management jobs in state owned enterprises – black Africans 57%. In the private sector, the figure is 24.5 % - only 10.8% are black African.
Given this, one might expect that the government would make it a priority to work out what the most appropriate role for parastatals is in the economy’s development. But it isn’t a priority – nor has it ever been.
Rule of short termism
State owned enterprises have been seen as a route to private investment, enrichment for the connected or a site for political battles but never as a key element in the development mix.
In fairness, private interests have shown no great interest in debating the role of state owned enterprises either. They have preferred taking sweeping positions for or against privatisation. But, given state owned enterprise’s role in governance, government should take the lead in thinking through what State owned enterprises should do.
The reality is different. Gigaba’s interest in selling off government holdings in state owned enterprises has much more to do with pressures for patronage than placing privatisation back on the agenda some 15 years after president Thabo Mbeki was forced to ditch it. It would be a strange turn if appeasing demands for public money revives a market friendly option which Mbeki had to abandon. And it certainly would not suggest a government committed to finding a development role for state owned enterprises.
It seems that the Mbeki government wanted to sell off shares in state owned enterprises not because it had a considered view that this would achieve the goals parastatals were designed to serve. The motive, rather, seemed to be to enhance private investor confidence and state revenues. Many might support these goals. But neither has to do with a long-term view on the contribution these enterprises could make to the economy.
A balancing act
Nor has Gigaba revived privatisation because he and his advisors have thought through the role for state owned enterprises which his predecessors ignored. He is, rather, trying to balance the two pressures he has faced since he became minister earlier this year.
On the one hand, he does not want to become the latest finance minister to face pressure for not giving a state owned enterprise what it needs. On the other, he does not want to preside over a second round of rating downgrades because he spent money the government did not have. The only way to square the circle is to sell off shares in one state owned enterprise (Telkom) to pay for the bailout in another, South African Airways. The government’s stake in Telkom is over 39%.
It’s hard to see how this strategy is sustainable. The South African Airways bailout request will not be the last. And it’s clearly not workable to keep on selling off national assets whenever state owned enterprises want cash injections. Nor is this likely to protect the minister from political flak. There is sure to be principled opposition to the strategy and patronage politicians will also notice that the prospective piggy bank is being sold off and will rebel.
But even if Gigaba does manage to bring off the trick, it’s obvious that this move has everything to do with balancing political pressures and nothing to do with a development strategy.
Between Mbeki’s strategic retreat and Gigaba’s strategic balancing act, state owned enterprises have not been quiet backwaters. They have been, and still are, key battlegrounds in the war between the ruling party factions as officials and politicians in its patronage group try to turn them into vehicles for making deals and accumulating goodies while their opponents try to stop them.
Lately, this battle has been played out in parliament – first over the South African Broadcasting Corporation, now over state owned power utility Eskom. South African Airways has been a battleground throughout and other state owned enterprises have been quieter sites of conflict.
Economy pays the price
This trench warfare, in which both factions seeking control of the ANC make gains after pitched battles but neither ever wins the war, may shape the future of the ANC and government’s role in the economy. But again, the issue here is a political fight for power, not considered positions on the role of state owned enterprises.
The economy pays an obvious price for this failure to care about their development role – missed opportunities for growth and the exclusion of many who go without wages and salaries. But, given the factionalised nature of politics, which is likely to continue, it is unrealistic to expect serious thinking from the politicians on the role that state owned enterprises can play in growth and inclusion.
This makes it urgent that private interests take this issue much more seriously, replacing the stereotyped debate with considered proposals for change. State owned enterprises are too important to be relegated to pieces on a chessboard. But nothing is likely to change until everyone with an interest in the economy’s future develops ideas on how state owned enterprises fit in and presses politicians to take notice.
Capitec passed Nedbank as South Africa’s fourth-largest lender by value to extend a market-beating rally that has made it the country’s best performing stock.
The shares of Capitec rose 2% in Johannesburg on Thursday to close at R891.03, giving it a market capitalisation of R103bn and extending gains this year to 28%. Nedbank climbed 0.9% to R205 for a market value of R102.1bn, paring its decline in 2016 to 14%.
Capitec’s assets don’t amount to even a 10th of those of Johannesburg-based Nedbank, which owns a retail and investment bank, wealth-management businesses and a stake in Africa’s most geographically diverse lender.
Capitec’s stock has gained in all but one of the years since it began trading in February 2002 at about R2.60. That’s the most among banks across emerging markets during the period and the best performer in South Africa’s benchmark Top40 Index.
“Capitec is gaining retail clients at a rate that makes it bigger than Nedbank,” said Patrice Rassou, head of equities at Sanlam Investment Management in Cape Town. The lender also grabbed market share when it launched its card business, which is “a huge growth vector,” he said.
Originally a purveyor of unsecured lending, Capitec broadened its product range into savings and credit cards to defy an economy ravaged by political turmoil and growth that the central bank estimates will reach 0.5% this year. It has expanded faster than the nation’s four biggest banks, adding 1.3 million customers in the last fiscal year alone to 8.6 million.
“Capitec’s simple bank model, absence of brick-and-mortar branches, modern technology and high growth rate has appealed to investors both locally and abroad,” said David Shapiro, the deputy chairperson of Sasfin Wealth in Johannesburg. “Management was nimble and easily attacked the big banks in a segment of the market that they had overlooked or perhaps felt was too difficult or risky to service.”
Earnings per share in the six months through August 31 will probably increase as much as 18%, Capitec said on September 6, extending a run that has seen its annual net income jump almost 130 times since 2003. Nedbank said on August 2 that first-half net income declined 3.7%, weighed down by losses at Ecobank Transnational, which makes the bulk of its money in Nigeria.
The company’s run might be nearing an end, with Capitec trading at more than 20 times future earnings compared with less than 8 for Nedbank, according to Richard Hasson, a money manager at Electus Fund Managers in Cape Town.
It is “unlikely that they will deliver growth in earnings at similar levels to the past,” he said. “Capitec is overvalued relative to their growth prospects.”
Faced with a growing economic crisis, South Africa’s new Finance Minister, Malusi Gigaba, has come up with a 14 point plan to turn the country’s economic fortunes around. Sibonelo Radebe asked Mohammad Amir Anwar to assess the plan.
How do you rate the recovery plan?
It’s still early days but one thing is clear. The plan was put in place as a response to the credit rating downgrades experienced in the second quarter of 2017. It comes with a greater focus on monetary and fiscal frameworks, a slippery area which has served neo-liberal agendas in the post-1994 South Africa.
Instead of focusing on policies that allow redistribution of wealth and creating sociopolitical and economic opportunities for those who were left out of the system, successive ANC governments have been obsessed with neo-liberal dictates which have served to maintain apartheid inspired economic structures.
This neo-liberal approach assumes that economic growth is the sole criterion to put the country back on the right track. This obsession with growth means that the focus is on short-term fiscal and monetary issues to gain the confidence of investors in the economy. Testament to this are the short deadlines of the plan and the accompanying narratives. These include references to reforms that “would support both businesses and consumer confidence, thereby laying the foundation for an economic recovery”.
It would seem that not much thinking has gone into changing the underlying structures of the economy for the long-term.
What are the most positive elements of the plan?
The minister has spoken about including different stakeholders in the recovery plan, which seems to be a good approach. South Africa’s history of segregation needs to be met with inclusive policies. Public consultations with key stakeholders and consensus must be key to any recovery plan.
The plan to tackle non-performing state-owned enterprises is very encouraging. But reckless recapitalisation by injecting public money into non-performing entities will only divert government resources, which could otherwise be used to help poor and marginalised people.
Government should realise that fixing troubled state-owned enterprises requires deep restructuring of the way they are operated and led. Boards that are part of the problem in terms of incompetency and corruption must be dissolved and reconstituted. Corrupt officials must be held accountable. Enhancing public-private partnership in some enterprises can also eliminate inefficiencies.
Another positive is that each of the 14 points and sub-points came with a deadline. This can focus the mind and ensure that work gets done. South Africa has seen many plans in the past come and go with no results.
But some of the dates are far too ambitious. For example, Gigaba speaks of finalising the Minerals and Petroleum Development Act amendment process by December 2017. This deadline is too tight and could result in low levels of participation. This will defeat the objective of getting stakeholder buy-in.
What are the most critical things that are missing from it?
Not enough attention has been given to job creation. The South African economy has for a very long time experienced jobless economic growth. This meant that the country’s jobless rate remained stubbornly high for many years. Recent figures of unemployment touching 27.7% are indeed worrying. Youth unemployment is said to be 52%. Any plan that addresses only economic growth without the creation of job opportunities will be found wanting.
The South African government’s priority should be to boost employment, by focusing on sectors that can easily generate jobs. I welcome the suggestion to boost the small, medium and micro-enterprises sector by giving them a share in public procurement. Small enterprises have been recognised for their potential to aid sustainable economic development and to create jobs.
The plan does not give details of overhauling the most important sectors of the economy: mining and agriculture. These sectors are key to generating growth and employment and can be used to drive economic transformation and empower communities that are at the margins of the economy.
For this to happen, the South African government needs to adopt radical approaches that include new and sustainable ways of doing business and redistribution of land.
There is a strong case for government to ensure that mining companies reinvest in workers and local economies. This can be done through investment in education of workers and forming business linkages with local companies that enable technology and knowledge transfer for a viable industrial transformation. Unemployed mine workers (and farm workers too) should be given new kinds of vocational training and education to help them find work elsewhere.
How do the ANC’s internal power struggles affect the plan?
The ANC’s leadership is in disarray. Intra-party fighting has led to opposing factions being formed, with each propagating its own economic vision. This increases the likelihood that a new crop of ANC leaders will change policy. Constant reshuffling and changes in key government positions can seriously affect policy plans and lead to uncertainty about the future.
A new leader will have to bring cohesion into an already fractured party, encourage all members to unite and work for a better South Africa and, most importantly, tackle corruption both in and outside party circles.
African Rainbow Capital (ARC), the financial-services firm started by billionaire Patrice Motsepe, is close to getting the banking licence it needs to challenge the dominance of South Africa’s biggest lenders, reports Bloomberg.
The Commonwealth Bank of Australia has reportedly said it will sell 10% of Tyme, a Johannesburg-based lender that allows customers to access funds through their mobile phones, to ARC after buying the business in 2015.
Bloomberg reports that Tyme was granted a provisional licence by the Reserve Bank last year.
Johan van der Merwe, co-CEO of ARC, said in an interview with Bloomberg that the licence is expected before the end of September. “The regulator is looking at the cloud-based system that ARC’s fintech partner is using to make sure it works before granting the full licence,” he was quoted as saying.
South Africa’s four biggest banks, including Standard Bank Group and FirstRand, haven’t had to face competition in the consumer market since Capitec Bank was established more than 15 years ago. “The South African banking environment is due for a bit of disruption. While Capitec has been able to play that role, the soon-to-be-licensed lender will be a disruption over and above that,” Van der Merwe said.
ARC plans to raise R4 billion ($ 300 million) by selling shares in its investment unit to selected investors. The sale will then be followed by a listing on the Johannesburg Stock Exchange next month that will give ARC Investments a market value of about R8,5 billion. The unit will have R2 billion in cash for future purchases,” Van der Merwe said.
Earlier this month, ARC reportedly acquired a 20% stake in Rain, a fixed and mobile data network operator. Rain reportedly aims to build the next-generation LTE-Advanced network in South Africa and has rolled out over 1 000 sites and 1 500 base stations over the past five years. It is on track to meet its target of 2 000 sites by the end of the year and 5 000 within three years.
South Africa's government welcomes the sale of the Tegeta coal mine by Oakbay Investments to a Swiss-based firm for $225 million, citing the jobs the sale could save, the department of mineral resources said on Wednesday.
Tegeta Exploration and Resources, whose mines supply coal to South African state-owned power utility Eskom, will be sold to Switzerland-based Charles King SA for 2.97 billion rand ($225 million), with the buyer committing to having a 30 percent minimum black-owned stake.
Oakbay is owned by the Gupta family, business friends of President Jacob Zuma accused of using their links with the 75-year old leader to wield undue influence and win lucrative state contracts. Both Zuma and the family deny any wrongdoing.
Do South African trade unions still represent the working class?
The South African labour landscape has undergone massive changes in the past few years that have left the country’s trade union movement almost unrecognisable from yesteryear.
The Congress of South African Trade Unions, still the country’s largest trade union federation, has been bleeding members for a while and has been shaken to the core by the exit of the National Union of Metal Workers of South Africa. This exit has led to a new formation, the South African Federation of Trade Unions. Both labour federations still claim to represent the interests of the working class.
Something else, perhaps more fundamental has been changing within South Africa’s trade union movement. The membership base has shifted significantly from one dominated by unskilled and semiskilled workers to one that shows bias towards skilled and professional workers. This is captured in a series of surveys undertaken between 1994 and 2014, before the National Union of Metal Workers’s exit.
The data shows that less than 1% of members within the trade union movement classified themselves as professional in early years of democracy. The picture had changed radically by 2008 with 20% of the respondents classifying themselves as professional. It would therefore seem that South Africa’s trade union federation had become a home for middle class civil servants, rather than a working class federation.
A group of labour scholars has been conducting surveys of Congress of South African Trade Unions members before every parliamentary election since 1994. The intention of the survey, titled Taking Democracy Seriously, was to study the impact of union democracy on parliamentary democracy.
The data set (drawn from five surveys, with the last conducted in 2014 just before National Union of Metal Workers of South Africa was expelled) tell us much more than just what union members’ attitudes towards democracy is. It paints a complex picture of who trade unions actually represent.
At its high point, the federation had a membership of 2.2 million. This was the result of three waves of unionisation.
The first wave of members comprised of workers who were organised into the initial manufacturing unions that resulted from the militancy of the 1973 strikes.
The second wave started in 1985 with the National Union of Mineworkers – the first to organise black miners and what was to become the largest union in the country – joining the Federation of South African Trade Unions in 1985.
The third wave came with the public sector unions that emerged after 1990. This wave benefited from the Labour Relations Act of 1995 which brought public sector employees under the same dispensation as the private sector in terms of collective bargaining and organisational rights.
In the early years of democracy public sector unions were so marginal to the federation and debates in labour studies that the researchers did not even include any unions from the public sector.
The professional factor
From 1994 union members were asked to classify themselves as being professional, clerical, supervisors, skilled, semi-skilled, or unskilled. Less than 1% classified themselves as professional in 1994, 1998 and 2004.
The data reflects a major shift in the last two surveys conducted after the inclusion of public sector unions in the sample. 20% of respondents classified themselves as professional in 2008, and 19% in 2014. This constituted a fifth of federation membership base, certainly a massive shift from the early 1990s.
Those members who classified themselves as clerical remained more or less constant, with those classifying themselves as supervisors increasing slightly from 4% in 1994 to 6% in 2014.
What is interesting though, is an increase of those who classify themselves as skilled increasing from 21% in 1994 to 37% in 2014. Those who classify themselves as unskilled declined from 30% in 1994 to a mere 8% in 2014, almost equal to the members who are supervisors.
This means that while 60% of the federation was made of semi-skilled and unskilled workers in 1994, by 2014 roughly 60% classified themselves as either skilled or professional, a complete inversion.
Loss of unskilled members
What explains this major transformation in the federation’s membership composition? We explored three possible explanations.
The entry of public sector unions, representing civil servants like teachers and nurses, into the federation is a major factor. This is confirmed when one breaks down the levels of skill by whether members belong to private sector or public sector unions for the 2014 survey.
The data shows that 78% of union members who classify themselves as professionals is from public sector unions. The unskilled and semiskilled members tend to come from private sector unions.
Its clear that the increase in the number of professionals within the federation was mainly a result of the entry of public sector unions. But this factor does not provide enough of an explanation for the decline in the percentage of unskilled members. We have to look elsewhere for this.
The data suggests that the post-apartheid era facilitated upgrading of skills within the federation. The proportion of members who had Grades 5-7 declined from 15% in 1994 to a mere 2% in 2014. Those with Grades 8-10 declined from 44% in 1994 to 11% in 2014.
Members with Grades 11-12 increased from 31% in 1994 to 45% in 2014 and members with technical diplomas increased from 3% in 1994 to 20% in 2014. Those with university degrees rose from less than 1% in 1994 to 17% in 2014.
Almost 40% of the trade union members in our sample have tertiary qualifications in the form of technical diplomas or university degrees. But the skills upgrade explanation also leaves a bit of a puzzle.
Does the fact that these trade union members now have higher levels of formal qualifications mean that a much smaller proportion of the work in South Africa’s economy is now done by skilled rather than unskilled workers? The labour market data more generally does not support this assumption. We have to look elsewhere for additional explanations.
A significant portion of South Africa’s unskilled manual labour is no longer performed by trade union members. This is due to the rise of non-permanent employment through subcontracting, casual labour, or informal forms of employment.
This means that as the trade union movement was gaining skilled and professional members it was bleeding unskilled manual workers. This leaves the question: has South Africa’s labour movement become a middle class movement, rather than one that primarily represents the working class?
This article is based on an extract from a chapter by Andries Bezuidenhout, Christine Bischoff and Ntsehiseng Nthejane in the newly published volume Labour Beyond Cosatu: Mapping the Rupture in South Africa’s Labour Landscape published by Wits University Press.
South Africa’s wildlife is thriving. One of the reasons for this is that landowners can profit from animals living on their land. Wildlife can be hunted for meat and trophies as well as being used non-consumptively for ecotourism. Thousands of former cattle ranches are now profitable game farms, hunting reserves and ecotourism lodges making South Africa a conservation success story.
But mixing profit and conservation is not simple. For example, a wildlife ranch generating profit from hunters must have animals that clients wish to hunt while a tourist lodge needs to stock species that are attractive and visible to those enjoying recreational game drives. Successful conservation requires a balanced, long-term approach but sometimes the goals of pursuing profit and long term conservation don’t always coincide.
One example of this is the market for “colour variants” - unusually coloured forms of particular species caused by rare mutations. Naturally occurring mutations causing colour variations happen in many animals. Rare colour variants of hunted African species have been known for a long time. They include black and white varieties of impala, golden wildebeest and pure white varieties of springbok. Trophy hunters seeking novelty might pay more to hunt these unusually coloured individuals.
The extraordinary spike, and then spectacular collapse, in the prices that these mutant colour forms sold for in the game auctions of South Africa over the past decade or so provides a timely reminder that profit does not always sit comfortably with conservation. Using resources on colour variant animals will divert from the conservation of other wildlife and can be detrimental.
Over the past decade or so, colour variants of a number of species including wildebeest, impala, zebra, blesbok, gemsbok and springbok began to be intensively bred by some game farmers, ultimately for the trophy hunting market.
In 2012, these rare varieties were estimated to represent only 1% of game in the country. Scarcity and the thought that hunters would pay handsomely for novel trophies led to a confidence that there would be considerable future payoffs. As a result, prices escalated. Normal impala could be bought for R1400, whereas black impala fetched R600 000. These colour variants were not yet being hunted – owners were focused on breeding lines and increasing numbers.
As prices continued to rise, critics continued to point out problems. Many believed it was putting profit before conservation.
They pointed out:
the dangers inherent in intensively breeding animals from limited genetic stock, leading to the problems associated with inbreeding, including reduced viability and fertility;
of offering captive bred animals to hunters, which many believe to be unethical and not “fair chase”;
of diverting resources from other conservation as game farms focus on colour variant animals to the detriment of other wildlife.
Despite naysayers, breeders bred and sold animals that commanded high prices throughout 2015. But talk of a bubble – when the price of an asset is based on past performance rather than actual value – was rife. Once potential buyers realise the asset is overvalued no one wants to buy it and prices collapse.
This is exactly what happened. At the beginning of 2016 prices started to fall and the devaluation continued spectacularly. Black impala rams now fetch perhaps less than R10,000 (1.7% of 2012 price) and white impala have dropped to R48,000 (0.5% of their 2014 peak value).
The problem seems to have been that demand didn’t exist on the scale imagined. Hunters were simply not enthused about adding these new colour variants to their trophy rooms. As a result, breeders were only selling to other breeders and to game farmers, many of whom went on to become breeders themselves, exacerbating the problem.
The problem with the profit motive
As one bubble bursts another seems to be inflating rapidly.
Advertisements for unusual colour variant game can still be seen in game ranching publications. But more apparent in the last two years have been captive-bred buffalo, sable and roan. They are normally coloured, but many have massive horns, a trait that is being bred for, and made even larger, by specialised game breeders. These animals are now regarded as the “fashionable” high-value game species and, as with colour variants, their prices are soaring. A buffalo bull went under the hammer for R168 million in 2016.
Inflated prices and controversy over hunting – especially following the killing of Cecil of Lion in Zimbabwe – make “greedy” wildlife ranchers obvious targets for those who oppose the use of wildlife for hunting.
But the profit-conservation balance isn’t necessarily any better in non-consumptive models. For example, baiting popular dive sites for sharks, crowding waterholes with cars or pushing boats closer to bird colonies are but a few of the sharp ecotourism practices driven mainly by greed.
The system works, for now
For all the faults of ecotourism and wildlife ranching in South Africa, the truth is that allowing wildlife to pay its way does appear, at the moment, to be working for conservation. Conservation necessarily involves money and finding ways for humans and wildlife to live together. In many places, making money from wildlife through hunting and tourism satisfies both needs.
But it seems inevitable that some practitioners of “it pays it stays” will attempt to make wildlife pay more than its rent. The colour variant bubble is perhaps a timely lesson that models to conserve nature must also account for the greed in human nature.
The view that South Africa should look towards the International Monetary Fund (IMF) to be rescued from the unfolding economic meltdown seems to be growing by the day.
It has been touted in the most unlikeliest of places. Even the new Finance Minister Malusi Gigaba, a proponent of the so-called radical economic transformation, has expressed willingness to engage the IMF.
There is no doubt about the seriousness of South Africa’s economic crisis. The country entered a technical recession after the economy contracted in the fourth quarter of last year and first quarter of this year. Unemployment seems to be rising towards the 30% mark.
And global credit rating agencies are uneasy about South Africa’s economic prospects. After a spate of downgrades early this year, they have threatened further downgrades which will take the country deeper into junk status. While the South African situation is getting more desperate, which calls for desperate measures, the idea to turn to the IMF is a bad idea and must be dismissed. There are a number of reasons why I think this is the case.
First, historical evidence suggests that IMF administered rescue programmes are actually a recipe for disaster. They worsen rather than rescue the situation. Second, to suggest that South Africa’s problems are financial in nature is a dangerous misdiagnosis. It will distract the government from the critical issues it needs to address which have little to do with the finances.
Third, one of the main driving factors of the current economic predicament is a loss of investor confidence. This is linked to other factors like policy uncertainty, political instability within the ruling party and mismanagement of public resources mixed with corruption. An IMF bailout won’t address these problems.
And lastly, hopping onto the IMF programme would disturb the country’s commitment to reforming the global multilateral financial world. South Africa is part of the BRICS bloc which is grooming a new and perhaps alternative multilateral development finance institution called New Development Bank. If anything, South Africa must look to BRICS if it needs financial rescue.
I believe that the solutions to the country’s economic crisis are within. It needs internal discipline to address them – not an external force.
The IMF does not have a good historical record. A view of the many countries which have subjected themselves to the IMF doesn’t inspire confidence. Instead of bailing out countries, it has created a list of countries suffering from debt dependency.
Of all the countries across the world that have been bailed out by the IMF:
11 have gone on to rely on IMF aid for at least 30 years
32 countries had been borrowers for between 20 and 29 years, and
41 countries have been using IMF credit for between 10 and 19 years.
This shows that it’s nearly impossible to wean an economy from the IMF debt programmes. Debt dependency undermines a country’s sovereignty and integrity of domestic policy formulation. The debt conditions usually restrict pro-growth economic policies making it difficult for countries to come out of recession.
IMF’s poor record is partly influenced by the policy choices that it imposes on countries it funds. The IMF policy choices for developing countries, known as a structural adjustment programme, have been widely condemned. The main reason is that they insist on austerity measures which include; cutting government borrowing and spending, lowering taxes and import tariffs, raising interest rates and allowing failing firms to go bankrupt. These are normally accompanied by a call to privatise state owned enterprises and to deregulate key industries.
These austerity measures would cause great suffering, poorer standards of living, higher unemployment as well as corporate failures. The current technical recession would be magnified into a full-blown crisis, leading to even greater shrinking of investment.
South Africa and the IMF
South Africa has always been aware of the dangers of taking IMF money. In December 1993, five months before the country became a democracy, the National Party government, under the guise of transitional executive committee, signed an IMF loan agreement.
When the African National Congress (ANC) came to power after the elections in April 1994 it walked away from the IMF offer. Its concern was mainly that the IMF would undermine the sovereignty of the newly established democracy by imposing inappropriate, policy choices that would have further harmed poor people.
Over the past 23 years South Africa has stayed away from the IMF. There is no reason to change this. In fact there are more reasons today for South Africa to maintain its position.
The BRICS factor
South Africa is set to assume the rotational chair of the BRICS bloc in 2018. The BRICS bloc was formed, in part, to challenge, the dominance of western Bretton Woods institutions – the IMF and the World Bank.
It would be politically naive and economically counterproductive for South Africa to give itself to the IMF. It would undermine South Africa’s integrity and tarnish its place within the BRICS bloc. And it would undermine the idea that the BRICS’ New Development Bank can offer an alternative to the Bretton Woods institutions.
BRICS promises to yield real economic benefits to South Africa because it can leverage trade between the member countries as well as public and private investment from within the bloc.
A better way to deal with the crisis
Advancing any financial assistance to South Africa without addressing the current bad policies would not address the current economic turmoil. Rather, it would result in the country sliding deeper into debt.
And any assistance would be entrusted to a government that has created the crisis because of imprudent policies. The result would be an extension of the crisis because the pressure would have been taken off the government leaving the architecture of the meltdown intact.
What needs to happen is that policymakers need to turn their minds to the real problems. This can simply be done without a bailout.
I, as well as other experts and civil society organisations, have submitted comments praising many of the bill’s provisions. But we advocate for an important change – for the new law to adopt an “open” fair use right, instead of the “closed” version in the current act.
By an “open” fair use right, we refer to one that would authorise any fair use of a copyrighted work, not just uses for prescribed purposes like criticism and review. The reason this is important is that, in the digital world we live in today, there are an increasing number of technological uses that are fair in that they do they do not substitute for the work in the market but that are not for traditional purposes like criticism.
Modern copyright law was first drawn up in the era of the printing press. At its core it gave exclusive rights for making and selling a copies of a particular work. Every time the work was reprinted it was made available to a new consumer or new group of consumers. So protecting copies created an economic system whereby copyright owners had a clear and distinct point at which they got paid for their work.
In the digital age, a large and growing number of technologies rely on intermediate copies that do not express the work to the public in any way. These new and important uses include cloud computing, text mining, detecting plagiarism and constructing search engine indexes. All of these kinds of uses make copies of works, but not the kinds of copies that compete with rights owners. Rather, they create entirely new services for users that couldn’t exist without the right to copy.
The copying at the heart of these technologies is sometimes referred to as “non-expressive use”. The term refers to the fact that such uses may reproduce protected works, but do not do so in a way that expresses (or communicates) the work to the public, and therefore cannot substitute for the work in any market. Such uses are fair by definition.
What ownership means in a digital world
Non-expressive uses rely on the ability of machines to read thousands (sometimes millions) of works to abstract metadata from them. The metadata is fundamentally different to the original, primary work. The metadata is fact – not expression.
Non-expressive uses have enormous potential to advance human progress without prejudicing the interests of authors or copyright owners. Language translation software makes communication across borders and cultures simple and easy for anyone with a Smartphone. But to teach computers to translate you must feed them with millions of examples of text from copyrighted sources. We have web applications that can recognise pictures of animals and name them, and that can recognise patterns in music and play along. But to teach computers to learn we have to provide them with data in the forms of millions of examples and pictures or songs to learn from. These examples do not substitute for the works - they cannot be enjoyed by a consumer instead of the original – but they are nonetheless “copies” in the literal meaning of the word.
Allowing non-expressive uses of copyrighted works is consistent with the goals of copyright. Copyright law is not an end in itself. It was established to motivate and reward the creation of new and original expression. That’s why the law distinguishes between facts and ideas (unprotectable) and expression (protectable). A work is only regarded as having been copied when a substantial part of its original expression has been reproduced. If the purpose of copyright is to protect original expression, it stands to reason that non-expressive use shouldn’t infringe copyright.
South Africa has a general exception that authorises a “fair dealing” with a work. But it’s closed – not open. It applies only to uses for the purposes of research or private study, personal or private use, criticism or review, and reporting current events. Non-expressive uses are not on the list.
The alternative to a closed list of exceptions is a general public interest exception, known in the US as “fair use”. Many countries, including in Singapore, Israel, Korea, Malaysia, and Philippines, have adopted open fair use or fair dealing clauses in their laws. Such laws have been interpreted to permit non-expressive uses. And, importantly, they provide the flexibility needed to recognise other (e.g. future) fair uses of works that benefit society without harming authors. The openness of the fair use is thus often referred to as the secret sauce of the US and other fair use country’s innovation-enabling environments.
What changes need to be made
South Africa could make suitable provision for non-expressive use by simply adding the words “such as” before the list of authorised purposes in its existing fair dealing clause. This would make the clause similar to the US fair use right in that it would be open to application to purposes not specifically mentioned in the Act, but which are nonetheless fair to authors.
An alternative to an open fair dealing right, or as a clarification, South Africa’s law could be amended with a specific provision to protect non-expressive uses. Such a provision would safeguard many uses we know of today, but would have the disadvantage of lacking the flexibility we may need to permit the uses of tomorrow.
South Africa's Bidvest will acquire management services group Noonan for approximately 2.7 billion rand ($208 million) as the trading, services and distribution company looks to grow internationally.
Bidvest, which spun off food service division Bidcorp in a $5 billion listing on the Johannesburg Stock Exchange last year, said on Monday it would Noonan from Alchemy Partners.
"Following the unbundling of our food services business last year, we have said that we intend pursuing a strategy of acquisitions that will provide geographic diversification for certain of our core businesses," Chief Executive Lindsay Ralphs said in a statement.
Ralphs said Noonan's business model was complementary and would help improve its services, increase its client base, and support international growth through further acquisitions. In February, Ralphs told reporters on a conference call that Bidvest would be able to raise $1 billion should it need it and that the firm has identified acquisition targets outside of South Africa.
For the Noonan deal, three-year, variable rate, euro-denominated funding has been secured at an attractive rate, it said. Noonan is based in Ireland and also operates in the United Kingdom, from where 40 percent of its revenue is derived, it said.
The effective date of the transaction is expected to be August. 31, assuming South African Reserve Bank approval.