Thursday, December 20, 2007

Is Zuma's election a disaster?

The man is a moron. Let's not beat around the bush. Anyone who states on the witness stand that he took a shower to avoid getting AIDS after unprotected sex is clearly in no shape to run a country.

There is little doubt in my mind that he's also a crook. The courts have already found that Shabir Shaik solicited bribes from arms deal bidders on Zuma's behalf. Shaik has been in jail for some time.

Zuma's supporters say that if there is a case against Zuma, why has he not been jailed? This is a disingenuous defense by a group of left wing proponents who care less about the man they support than those against who he stands. Zuma's lawyers have fought every attempt to get the man in court. Surely if the man is innocent, he would welcome the Mauritian diary of the head of Thint in court? Surely he would not worry about the seizure of his personal documents? After all he has nothing to hide?

Further, the man is an out and out bigot. He explained to an adoring crowd that if a gay man had stood before him when he was young, he would have knocked him out.

Finally, Zuma is a bumbling populist. Don't ask him his policies - just state your desires and beliefs and he'll agree. At this rate South Africa will be the only Capitalist Communist country in the world.

But I do not believe that having Zuma run this country will be a disaster in itself. His political masters are far more frightening. The day after his election, the ANC voted to reintegrate the Scorpions (South Africa's version of the FBI) into the South African Police. This despite the obvious difficulties posed by the current Scorpion investigation of the chief of police for involvement in organised crime. Of course the ANC freely admits that logic had nothing to do with this decision - the Scorpion's investigation of Zuma for corruption had everything to do with it. Apparently their investigations have been manipulated by Mbeki to further his political battles. How will their integration into the police help prevent their manipulation when the head of the SA Police is a political appointee and not a professional policeman?

The Scorpions decision is one thing. Economics is another. The antagonism to inflation targeting by Cosatu (the Congress of South African Trade Unions) and the SACP (the South African Communist Party has followed swiftly on the heels of the election of their man to the head of the Tri-Partite alliance. They have pronounced that inflation must be managed in the context of broad developmental goals and not as an end in itself. This is all well and good, and there is much that can be written about what the inflation targeting range should be based on the factors driving inflation increases in South Africa. But South Africa adopted inflation targeting as a methodology precisely because the fuzzy interpretation of multiple objectives resulted in continued misalignment with the markets and wild swings in the key economic indicators.

Most economists will appreciate that cost push inflation cannot be targeted by interest rate adjustments. Fine. Then modify the targeting metric (CPIX - consumer price inflation less interest) to also exclude oil/petrol. What I am saying is don't through the baby out with the bath water.

Further there is some debate as to whether the 3% to 6% inflation target range is too low for South Africa - a developing country. The Philips curve demonstrates a trade off between inflation and employment. The lower the inflation rate, the higher the rate of unemployment. The precise relationship varies from country to country. Again, this is all well and good, but then debate the range, don't through out the most successful inflation management methodology yet seen in the world.

But the most frightening news was that of a debate that took place yesterday on nationalisation. Delegates to the ANC conference raised the possibility of nationalising Mittal Steel. Mittal bought ISCOR - an old parastatal - and gradually rebuilt an inefficient dirty apartheid era entity. Since then they have been found guilty of anti-competitive behaviour, charging import parity prices and benefiting from a monopoly position. However, they are now a top quartile low cost steel producer. The competition watchdog found them guilty of price fixing and fined them a substantial amount. That's how markets should work. Workers want them renationalised however. This together with the debate on shopping malls and their impac on traders in the townships. The focus here is jobs - or more specifically the mandate of Cosatu and the SACP.

And to me this is the danger of Zuma's presidency. He is beholden to the left. They voted him in and the ANC executive is now loaded with their sympathisers. There is almost a conflict of interests here. Cosatu and the SACP's focus is jobs for their members and the highest wages they can get. This is one part of the economy and has all the potential to ignite a wage price spiral. On a productivity / skill equivalent basis, South Africa has a tragically uncompetitive labour force. In order to create growth, grow exports, reduce the current account deficit, etc we have to increase output per rand of wages. To focus merely on the jobs and wages side of the equation ignores the prices paid by the consumer and the inevitable loss of competitiveness. Our textile industry offers the perfect case study. Which is more valuable - low price clothing for the poor or higher wages for textile workers? The first part of that debate is consistently ignored by trade unions. However, the impact of rising prices and the need for further increases in wages is not. Hence the wage price spiral.

In fact, unions prefer higher inflation as it allows them to negotiate higher nominal wage increases and they are then seen as having achieved more by their members. Witness the mass hysteria about single figure percentage increases in wages in the low inflation environment of the past decade. This illustrates perfectly why it takes many years to decrease wage push inflation.

One remarkable quote from that the above article:

A delegate to the commission said the minister and other senior leaders in the economics sphere do not explain why they do not agree with delegates’ suggestions for the re-nationalisation as well as a national state-owned mining company.

“The delegates felt it is needed because it would enable them to redistribute resources. But Mphalwa did not explain their reasons for opposing it properly. They might have access to information and obviously know more about international trends, but they don’t explain it to us.”

This is the legacy of the Mbeki years. Decision making in an aloof manner that has done nothing to build a shared understanding of good economic practice. If we are to recreate the South Korean miracle, there is much work to be done in educating the masses and aligning the nation.

The following sensible conclusion demonstrates that this is possible:

“People are seeing the mushrooming of shopping complexes coming up in townships and that is a negative thing because it is pushing out the small businesses and general dealers. But now there are Chinese and Pakistani people, coming in and taking over the small businesses and making a success of them.

“Where does the problem lie? Obviously there is a lack of skills and that might rather be the problem, not the fact that the big shops are coming up. Also, people these days don’t want general dealers, they want specialised shops, so that also takes them away from the general dealers,” the delegate said.

Wednesday, December 12, 2007

Are friends who don't call, friends?

I've written about this before.

I'm lucky - I have lots of friends. I had a great Italian evening this last Sunday where I cooked for 12 friends - it was great fun and good to be with so many people I know.

But so many "friends" are so lousy at keeping in contact. I invite them to meet up and hear nothing more from them.

Well, my focus is on those who want to be around me from now on. The others who hear less from me? I'll touch base now and again, but they can assume from the less effort on my part that I have taken their lack of interest as meaning they regard me as peripheral. And hence I will do the same.

Who is to blame for South Africa's power crisis?

Very few people aren't hot under the collar about load shedding in South Africa. Load shedding occurs when power supply cannot meet demand and customers are cut off to prevent brown outs and black outs.

As someone who has worked as a consultant to the industry I've had to bight my tongue as to the real reasons behind the problems. But it seems the government is now admitting to the problem (see the article below and more here).

Indeed the government did ignore Eskom requests to build more generation capacity. And as such the country will be short of capacity for at least another 4 years.

Further, the reason they ignored the requests was due to consultants who sold the government on the idea that the South African market should be liberalised (open to competition). Until that happened, Eskom's right to build was taken away. New entrants would build the power generation capacity in a market with the lowest electricity prices in the world - prices that could not cover their costs of capital.

Further, the government then adopted an inflation targeting regime. Applications for electricity price increases outside of the government's inflation targeting range were greeted with howls of protest and derision.

Further still, we have a de facto industrial policy that exports electricity though high energy input manufactured items such as aluminum smelting and mining. One aluminum smelter consumes as much electricity as a city the size of Port Elizabeth. The recent efforts to get an aluminum smelter as anchor tenant for the Coega industrial complex in the Eastern Cape completely ignored the fact that our power prices need to rise substantially to cover the costs of capital of new power stations and the supply crunch we currently suffer.

Neither liberalisation nor inflation targeting are bad policies. However, as with most things in life, adopting a polar position ignores the realities. Overzealous liberalisation contributed to power outages all over the world, including the California and US East Coast crises. Investment decisions are typically based on 5 to 10 year paybacks. Electricity planning requires at least a 20 year horizon. A major power station takes from 10 to 15 years to plan and build. For this reason, private enterprises seldom invest enough or in time to ensure uninterrupted electricity supply.

I have sympathy for the guys at Eskom right now. It will continue to be a thankless task working there over the next 5 years. Their planners knew we were running out of electricity but were held back from building new capacity.

Many who love to criticise anything post-apartheid have been joined by millions of other suffering South Africans pointing fingers and claiming that only morons could have got us into this situation.

I'd point directly at the various consultants who earned hundreds of millions promoting new build policies that ignored the coming supply crunch. Of course the decision makers at the Department of Mineral and Energy (DME) aren't much further behind in the blame queue - they listened.

In the mean time, this is costing the economy and me a fortune. I shelled out about R7000 (US $1000) for a UPS a while back to keep my business computer server going during interruptions. Given the duration of interruptions (this week two scheduled interruptions of 2 and a half hours each), the UPS is not enough. I've been busy with a project to extend my pond and pumphouse and so have built a generator room. My next expense is to rewire my house for automated power switchover to generator on a power outage and a generator itself. That is going to cost a fortune. The next expense will be for diesel to keep the thing running.

Goverment ignored Eskom pleas
Dec 12 2007 11:25 AM

Johannesburg - President Thabo Mbeki has acknowledged that government under-investment is to blame for a growing number of power cuts that have plunged large parts of the country into darkness.

Addressing a fund-raising dinner for the ruling African National Congress night, Mbeki said his government should have heeded pleas by state power utility Eskom several years ago to invest more in electricity generation to keep up with country's economic growth.

"When Eskom said to the government: 'We think we must invest more in terms of electricity generation', we said no, but all you will be doing is just to build excess capacity," Mbeki said in comments broadcast on public radio.

"We said not now, later. We were wrong. Eskom was right. We were wrong."

Mbeki's rare public apology comes at a time when the country is experiencing the worst power cuts in years, forcing Eskom to start rationing electricity this week as part of a programme that should last until the end of the week.

The rationing has led to a raft of complaints from businesses and retailers in the build-up to Christmas, while traffic jams are a common sight with many traffics lights out of action.


Tuesday, December 04, 2007

Can you tell a story?

Someone shared something they had written with me today and it reminded me of an Oscar Wilde short story.

Telling a story is a gift. This one contains every talent I could wish for in the art.

From CELT: The Corpus of Electronic Texts

The Nightingale and the Rose (Author: Oscar Wilde)

`SHE said that she would dance with me if I brought her red roses,' cried the young Student; `but in all my garden there is no red rose.'

From her nest in the holm-oak tree the Nightingale heard him, and she looked out through the leaves, and wondered.

`No red rose in all my garden!' he cried, and his beautiful eyes filled with tears. `Ah, on what little things does happiness depend! I have read all that the wise men have written, and all the secrets of philosophy are mine, yet for want of a red rose is my life made wretched.'

`Here at last is a true lover,' said the Nightingale. `Night after night have I sung of him, though I knew him not: night after night have I told his story to the stars, and now I see him. His hair is dark as the hyacinth-blossom, and his lips are red as the rose of his desire; but passion has made his lace like pale ivory, and sorrow has set her seal upon his brow.'

`The Prince gives a ball to-morrow night,' murmured the young Student, `and my love will be of the company. If I bring her a red rose she will dance with me till dawn. If I bring her a red rose, I shall hold her in my arms, and she will lean her head upon my shoulder, and her hand will be clasped in mine. But there is no red rose in my garden, so I shall sit lonely, and she will pass me by. She will have no heed of me, and my heart will break.'

`Here indeed is the true lover,' said the Nightingale. `What I sing of he suffers: what is joy to me, to him is pain. Surely Love is a wonderful thing. It is more precious than emeralds, and dearer than fine opals. Pearls and pomegranates cannot buy it, nor is it set forth in the market-place. it may not be purchased of the merchants, nor can it be weighed out in the balance for gold.'

`The musicians will sit in their gallery,' said the young Student, `and play upon their stringed instruments, and my love will dance to the sound of the harp and the violin. She will dance so lightly that her feet will not touch the floor, and the courtiers in their gay dresses will throng round her. But with me she will not dance, for I have no red rose to give her;' and he flung himself down on the grass, and buried his face in his hands, and wept.

`Why is he weeping?' asked a little Green Lizard, as he ran past him with his tail in the air.

`Why, indeed?' said a Butterfly, who was fluttering about after a sunbeam.

`Why, indeed?' whispered a Daisy to his neighbour, in a soft, low voice.

`He is weeping for a red rose,' said the Nightingale.

`For a red rose!' they cried; `how very ridiculous!' and the little Lizard, who was something of a cynic, laughed outright.

But the Nightingale understood the secret of the Student's sorrow, and she sat silent in the oak-tree, and thought about the mystery of Love.

Suddenly she spread her brown wings for flight, and soared into the air. She passed through the grove like a shadow, and like a shadow she sailed across the garden.

In the centre of the grass-plot was standing a beautiful Rose-tree, and when she saw it, she flew over to it, and lit upon a spray.

`Give me a red rose,' she cried, `and I will sing you my sweetest song.'

But the Tree shook its head.

`My roses are white,' it answered; `as white as the foam of the sea, and whiter than the snow upon the mountain. But go to my brother who grows round the old sun-dial, and perhaps he will give you what you want.'

So the Nightingale flew over to the Rose-tree that was growing round the old sun-dial.

`Give me a red rose,' she cried, `and I will sing you my sweetest song.'

But the Tree shook its head.

`My roses are yellow,' it answered; `as yellow as the hair of the mermaiden who sits upon an amber throne, and yellower than the daffodil that blooms in the meadow before the mower comes with his scythe. But go to my brother who grows beneath the Student's window, and perhaps he will give you what you want.'

So the Nightingale flew over to the Rose-tree that was growing beneath the Student's window.

`Give me a red rose,' she cried, `and I will sing you my sweetest song.'

But the Tree shook its head.

`My roses are red,' it answered, `as red as the feet of the dove, and redder than the great fans of coral that wave and wave in the ocean-cavern. But the winter has chilled my veins, and the frost has nipped my buds, and the storm has broken my branches, and I shall have no roses at all this year.'

`One red rose is all I want,' cried the Nightingale, `only one red rose! Is there no way by which I can get it?'

`There is a way,' answered the Tree; `but it is so terrible that I dare not tell it to you.'

`Tell it to me,' said the Nightingale, `I am not afraid.'

`If you want a red rose,' said the Tree, `you must build it out of music by moonlight, and stain it with your own heart's-blood. You must sing to me with your breast against a thorn. All night long you must sing to me, and the thorn must pierce your heart, and your life-blood must flow into my veins, and become mine.'

`Death is a great price to pay for a red rose,' cried the Nightingale, `and Life is very dear to all. It is pleasant to sit in the green wood, and to watch the Sun in his chariot of gold, and the Moon in her chariot of pearl. Sweet is the scent of the hawthorn, and sweet are the bluebells that hide in the valley, and the heather that blows on the hill. Yet Love is better than Life, and what is the heart of a bird compared to the heart of a man?'

So she spread her brown wings for flight, and soared into the air. She swept over the garden like a shadow, and like a shadow she sailed through the grove.

The young Student was still lying on the grass, where she had left him, and the tears were not yet dry in his beautiful eyes.

`Be happy,' cried the Nightingale, `be happy; you shall have your red rose. I will build it out of music by moonlight, and stain it with my own heart's-blood. All that I ask of you in return is that you will be a true lover, for Love is wiser than Philosophy, though she is wise, and mightier than Power, though he is mighty. Flame-coloured are his wings, and coloured like flame is his body. His lips are sweet as honey, and his breath is like frankincense.'

The Student looked up from the grass, and listened, but he could not understand what the Nightingale was saying to him, for he only knew the things that are written down in books.

But the Oak-tree understood, and felt sad, for he was very fond of the little Nightingale who had built her nest in his branches.

`Sing me one last song,' he whispered; `I shall feel very lonely when you are gone.'

So the Nightingale sang to the Oak-tree, and her voice was like water bubbling from a silver jar.

When she had finished her song the Student got up, and pulled a note-book and a lead-pencil out of his pocket.

`She has form,' he said to himself, as he walked away through the grove---`that cannot be denied to her; but has she got feeling? I am afraid not. In fact, she is like most artists; she is all style, without any sincerity. She would not sacrifice herself for others. She thinks merely of music, and everybody knows that the arts are selfish. Still, it must be admitted that she has some beautiful notes in her voice. What a pity it is that they do not mean anything, or do any practical good.' And he went into his room, and lay down on his little pallet-bed, and began to think of his love; and, after a time, he fell asleep.

And when the Moon shone in the heavens the Nightingale flew to the Rose-tree, and set her breast against the thorn. All night long she sang with her breast against the thorn, and the cold crystal Moon leaned down and listened. All night long she sang, and the thorn went deeper and deeper into her breast, and her life-blood ebbed away from her.

She sang first of the birth of love in the heart of a boy and a girl. And on the topmost spray of the Rose-tree there blossomed a marvellous rose, petal following petal, as song followed song. Pale was it, at first, as the mist that hangs over the river---pale as the feet of the morning, and silver as the wings of the dawn. As the shadow of a rose in a mirror of silver, as the shadow of a rose in a water-pool, so was the rose that blossomed on the topmost spray of the Tree.

But the Tree cried to the Nightingale to press closer against the thorn. `Press closer, little Nightingale,' cried the Tree, `or the Day will come before the rose is finished.'

So the Nightingale pressed closer against the thorn, and louder and louder grew her song, for she sang of the birth of passion in the soul of a man and a maid.

And a delicate flush of pink came into the leaves of the rose, like the flush in the face of the bridegroom when he kisses the lips of the bride. But the thorn had not yet reached her heart, so the rose's heart remained white, for only a Nightingale's heart's-blood can crimson the heart of a rose.

And the Tree cried to the Nightingale to press closer against the thorn. `Press closer, little Nightingale,' cried the Tree, `or the Day will come before the rose is finished.'

So the Nightingale pressed closer against the thorn, and the thorn touched her heart, and a fierce pang of pain shot through her. Bitter, bitter was the pain, and wilder and wilder grew her song, for she sang of the Love that is perfected by Death, of the Love that dies not in the tomb.

And the marvellous rose became crimson, like the rose of the eastern sky. Crimson was the girdle of petals, and crimson as a ruby was the heart.

But the Nightingale's voice grew fainter, and her little wings began to beat, and a film came over her eyes. Fainter and fainter grew her song, and she felt something choking her in her throat.

Then she gave one last burst of music. The white Moon heard it, and she forgot the dawn, and lingered on in the sky. The red rose heard it, and it trembled all over with ecstasy, and opened its petals to the cold morning air. Echo bore it to her purple cavern in the hills, and woke the sleeping shepherds from their dreams. It floated through the reeds of the river, and they carried its message to the sea.

`Look, look!' cried the Tree, `the rose is finished now;' but the Nightingale made no answer, for she was lying dead in the long grass, with the thorn in her heart.

And at noon the Student opened his window and looked out.

`Why, what a wonderful piece of luck!' he cried; `here is a red rose! I have never seen any rose like it in all my life. It is so beautiful that I am sure it has a long Latin name;' and he leaned down and plucked it.

Then he put on his hat, and ran up to the Professor's house with the rose in his hand.

The daughter of the Professor was sitting in the doorway winding blue silk on a reel, and her little dog was lying at her feet.

`You said that you would dance with me if I brought you a red rose,' cried the Student. `Here is the reddest rose in all the world.

You will wear it to-night next your heart, and as we dance together it will tell you how I love you.'

But the girl frowned.

`I am afraid it will not go with my dress,' she answered; `and, besides, the Chamberlain's nephew has sent me some real jewels, and everybody knows that jewels cost far more than flowers.'

`Well, upon my word, you are very ungrateful,' said the Student angrily; and he threw the rose into the street, where it fell into the gutter, and a cart-wheel went over it.

`Ungrateful!' said the girl. `I tell you what, you are very rude; and, after all, who are you? Only a Student. Why, I don't believe you have even got silver buckles to your shoes as the Chamberlain's nephew has;' and she got up from her chair and went into the house.

`What a silly thing Love is,' said the Student as he walked away. `It is not half as useful as Logic, for it does not prove anything, and it is always telling one of things that are not going to happen, and making one believe things that are not true. In fact, it is quite unpractical, and, as in this age to be practical is everything, I shall go back to Philosophy and study Metaphysics.'

So he returned to his room and pulled out a great dusty book, and began to read.