An open letter to President Cyril Ramaphosa and economic adviser Trudi Makhaya

An open letter to President Cyril Ramaphosa and economic adviser Trudi Makhaya

Mr President and Ms. Makhaya

This letter is prompted by a some recent articles from international organisations relating to the future directions of industry. My concern is that the ANC government’s Industrial Policy Action Plan doesn’t seem to factor in those forecasts.

The initial spark for this letter was the BBC program Saudi Arabia: After Oil, which went into the plans of Saudi Arabia to diversify away from oil dependence. Relating more generally to fossil fuels, a World Economic Forum article discusses how the future of energy is moving away from fossil fuels. This obviously impacts countries like Saudi Arabia, but it will also affect South Africa as a major coal producer.

The current status

South Africa’s economy is slipping between recession and low growth. The manufacturing sector is stagnating or in decline, due to many factors including labour relations, regulations and being uncompetitive compared to other developing countries. The education system is not keeping up, with The Economist stating that it was “one of the world’s worst“. Related to both of these, the jobs situation is also in a terrible state, with the unemployment rate at over 25%. Finally, the country’s ratio of debt to GDP is around 55%, not bad compared the countries like Greece, but not good.

The ANC government’s plan for economic growth is flawed because they haven’t thought about what Einstein said about solving problems.

You can’t solve them by using the same kind of thinking you used when they were created.

The government seems to believe that industrialization is the answer, but it ignores where the world is going.

Where the world is going

South Africa has some of the world’s biggest reserves of platinum and manganese, and of course it also has significant reserves of gold, iron ore, coal, chrome and zinc. However, it seems likely that the minerals the world will need in the 21st century are different the ones it needed in the 20th century.

Take coal, one of the main non-oil sources for power generation for over 100 years. But Bill Gates’ Breakthrough Energy Coalition wants to do something even more ambitious, and that is to bring free (or very cheap) energy to the world.

Where South Africa is

South Africa has large reserves of coal, but views on the trend of fossil fuels is contradictory.

According to one article:

  • the renewables superpower – the shift from coal, oil and natural gas to zero-emission energy generation and transport means a new set of elements will become key
  • “A country that creates green energy infrastructure, before political and economic control shifts to a new group of ‘world powers’, will ensure it is less susceptible to future influence or to being held hostage by a lithium or copper giant.”

Another article tells a different story:

  • the world invested more in solar energy than coal, gas and nuclear combined in 2017

A chart in shows growth in world’s coal power plants.

As we are now well aware, employment in the SA gold mining industry is falling and is below 100000, according to Mike Schussler.

After Gold

My recommendation is that what we need is an “After Gold” policy, in the same way that Saudi Arabia and Qatar have announced plans for a post-oil world by 2030.

We are waiting to hear about your Digital Industrial Revolution Commission. In the meantime, there are other things you can start on.

Rather than focus on industrialization per se, let’s look at alternatives.

  • Encourage agriculture to ensure food security and bring in younger people.
  • Develop policies and actions to protect water security; the Western Cape has been learning that.
  • Focus on the infrastructure that is really needed. That means spend money on replacing decaying infrastructure.
  • Consider re-constructing the education system away from a 19th and 20th century curriculum towards one that will be useful for the 21st century.

There is no shortage of recommendations – about policy direction, and actions.

Please just get started.


Why the US is different to other countries

I have just spent 10 days in the USA, split between a week just south of Los Angeles in Costa Mesa, and several days in Lawrence, Kansas. Although I have been to the US several times before, this time it was different, for reasons I explain below. But also because I may have figured out the essence of what makes the US different to other countries when it comes to business and technology.

My previous visits were either as a pure tourist, or as an overseas employee of a US company coming to get an update on future plans and directions. For those work-related visits, I was a passive recipient. This time it was different. I went to the US to attend a sales conference organized by my employer in South Africa. This time I was one of the people helping to set future plans and directions. This time I had to actively engage – mainly, though not exclusively, with people who work in our North American offices about their concerns and issues.

One of the ongoing issues is that we, i.e. South Africans, don’t understand the US. In the past, I have always supported the view that while the US may start earlier with certain things, there’s not that much difference when it comes to business. But at the end of the sales conference, I had a strong feeling that things were much more different than I had been able to understand.

On my previous working visits, I received direction from US head office people, and used to consider them rather ignorant of the world outside the USA. Now the roles were somewhat reversed: I was the head office person, and they were saying people like me were ignorant of their world.

It took a few days after the intensity of the sales conference, staying with family in Lawrence, and talkininside Dillonsg with my South African brother-in-law who works at the University of Kansas, to distill what I think is the essence of the difference. It was after a visit to a local supermarket, Dillons, that it occurred to me.

It’s what is considered basic.

For each product category, e.g. bread, the range at Dillons was two or three times more than I have seen in South African, or UK, supermarkets. Moreover, the products in Dillons exploited every single consumer niche you could imagine, no matter how specialized the niche. In others words, the choice and competition was greater than I had experienced. I surmise that this makes US consumers more demanding than consumers elsewhere, and makes what they would consider basic different.

When hearing the North American sales people talk about their market and competition, the same kind of impression arose:
product category range + exploitation of niches = high degree of expectation from business

Perhaps it’s because the US economy is so highly competitive that the basics are different – in supermarkets, in business, in IT (and if you watch any reality TV, in relationships).basic differences

It’s something for both sides to consider. If you enter the US market to do business, be aware of how the needs and requirements will differ and be at a higher level. On the other hand, for US companies operating internationally, don’t expect the same issues to be of concern, and don’t assume US concepts are universal.

When it comes to business software, the requirements of a US business are likely to be greater or more detailed than business in other countries because what is considered basic fo US business is different. The same duopoly then applies – overseas software companies must get really immersed in the US to learn what is needed, US software companies may not find the same functional requirements from businesses in other countries.

My 40 years in South Africa

40 years in South AfricaForty years ago today, 13th January 1974, I landed in Johannesburg at the then Jan Smuts International Airport (now OR Tambo International Airport). My father had been living there for about a year, and as I had finished school in England and had no other plans, it was deemed OK for me to go to South Africa and see what I could do.

At the time it was going to be a short temporary stop, but as of today it has been a long one. In England at that time university was not considered necessary, but thanks to my Dad’s contacts who said I should go, I ended up going to university in Johannesburg, and that basically established my future path.

One of the original reasons for thinking my stay would be temporary was of course that South Africa at the time was becoming a pariah state due to its apartheid policies. But even though I was aware of it, the way life was lived by white people in those days, you didn’t see the bad side of the racial divide – because now I realise that the government made sure we didn’t see it. It was only through being conscientised at university that I began to realise apartheid’s impact. But it took events twenty years later like the Truth and Reconciliation Commission for white people to really understand what apartheid was like.

When I arrived in South Africa, the population of the country was about 25 million ( The latest census figures show population in 2011 was 51 million. In 1974 South Africa was a police state with fairly strong censorship, today we are a constitutional democracry with a good deal of personal freedom (although I now think that some censorship would be a good thing). In 1974 South Africa claimed to be a Christian state, however as Beyers Naude pointed out, apartheid was not scriptural and its effects were unacceptable. Today it is a secular state with what is considered one of the best constitutions in the world.

In 1974 South Africa didn’t even a national television service – the Nationalist government considered it bad. Now we have more television stations available inside the country and internationally than could have been imagined forty years ago. In those days, the only way to communicate with people other than face-to-face was via the telephone, now we mobile telecommunications and the power of the Internet.

In 1974 the only family I had in South Africa was my father. Now I have a wife, three children, a future son-in-law, some wonderful friends, a great church family, and good colleagues at work and around the world.

In 1974 my father could fill up the 40 litre petrol tank of his car for R10; now the same amount costs over R500. In 1974, the SA Rand:UK Pound exchange rate was about 1.5:1, now its 17:1.

In 1974 my father and I lived in a 2 bedroom flat on the outskirts of the Hillbrow flat land (then it was a cool place for a young guy to live). Now I live in a four bedroomed house in the suburbs of Randburg, and have a holiday cottage on the Garden Route.

In 1974 the area where I now work was rural, and people who lived here would have been considered as living far out. Now this is part of the built-up area of northern Johannesburg. Ten years ago, it was a dream of mine to working at this company, but I could not see how it would happen. I have now been here for nearly five years.

In 1974 computers were huge machines that were housed in cooled rooms and managed by people in white coats; the early experience I had in second year university made them anathema to me. These days I have a small cell phone with more computing power than those 1974 behemoths, and I have been working with computers for thirty years.

I wonder what is going to happen in the coming years?

Observing the Sabbath can be helpful

In the Old Testament part of the Christian bible, the book of Exodus (part of the Jewish Torah) tells how Moses called for the institution of the Sabbath:

“This is what the Lord commanded: Tomorrow will be a day of complete rest, a holy Sabbath day set apart for the Lord.” Exodus 16:23

Very few people actually observe this nowadays, but I recently had the chance to revisit the concept, and I can see why it is still a good practice.

Recently my wife and I took an extended weekend to the Garden Route on the southern coast of South Africa where we have a holiday cottage. We both took laptops as we had various projects we could work on, however we had to stop using them on Sunday. The reason is that we had a notification that Eskom (South Africa’s government monopoly electricity supplier) would be cutting off power to the whole municipality from Sunday morning for the whole day to do important maintenance. Fortunately the cottage has gas so we weren’t going to be inconvenienced too much.

So on Sunday morning I sat, read articles I had printed, thought, jotted down notes and ideas, and realised how relaxing it was. I was being ‘forced’ to take a break and rest, and it was a good thing. It was such a good thing that when I went to work on Monday morning, I was re-energised and ready to start – which is not the case every Monday. I believe that was due to the rest I got on Sunday.

For many of us, every day we are busy trying to get things done at work. The problem is that same pace extends into the home, and into the weekend, as a result I don’t think people get the opportunity to disconnect. This was also brought home by a Harvard Business Review article “Are You Sleeping With Your Smartphone?“, which raises the issue of ‘the cycle of responsiveness and the possibility of breaking it.’

I am now resolved to start having some purposeful down-time during week-ends, and that doesn’t mean watching more sport on TV. The experience that Sunday once again makes me realise how old truths are still important, eternal, and relevant. In Moses’ day people had busy lives as well – farming, shepherding, fetching water, etc – and would have also needed to rest. As I get older, the more I realise that what the ‘old folks’ said continues to apply.

By the way, this was my view on that Sunday morning:

View from the deck

Favourable view of South Africa – BBC World Service Poll

The BCC World Service, an international multimedia broadcaster, has published its 2011 country rating poll, in which South Africa’s rating has shown a significant increase.

According to the report’s section on South Africa:

Forty-two per cent of people globally have positive views. This represents a seven-point increase since 2010, and is the second highest improvement in positive views among all countries rated, after Brazil. Negative views remained steady at 27 per cent.

…  Views are getting warmer in North America, with significant improvements observed in South Africa’s positive influence ratings in Canada (45%, up 9 points) and the US (50%, up 13 points). 

A South African web site gives more details, including a comment by Catherine Grant, head of economic policy at the South African Institute of International Affairs that it:

“reaffirms South Africa’s standing as being an essential emerging-market player which could no longer be overlooked”.

Grant further stated the fact that the outcomes will give South Africa a lift in advance of its very first meeting as a new member of the Brics (Brazil, Russia, India, China and now South Africa) bloc to be held in China in April.

More detailed information on the report can be found on the BBC site and at

Positive side of the SA economy

The following statistics were given during the 2011 State of the Nation Address by President Jacob Zuma:

  • 400 000 – the number of additional South Africans served with a basic water supply in 2010
  • 81% – the proportion of the country now electrified, compared to 63% in the year 2000
  • R20-billion – tax allowances or tax breaks to be put in place to promote investment, expansion and upgrades in South Africa’s manufacturing sector
  • R550-million – funds set aside for infrastructure upgrades and expansions countrywide
  • 7.3-million – the number of tourists that arrived in South Africa in 2010
  • 95 – the number of major international meetings and conferences that South Africa has already secured between now and 2016
  • R75-billion – Eskom’s investment in new power stations, as well as the return to service and transmission of other projects
  • R2.6-billion – the amount that the government will spend on water services this year
  • 2.5-trillion – the value of South Africa’s mining assets – in US dollars

Information provided via Acsis financial services group.

A few days later, the Johannesburg Stock Exchange All-Share Index breached its highest level, previously set in May 2008.

Big moves by international business into South Africa

In the past two months there has been news about international businesses making big moves into South Africa.

The first news was in July when the Japanese telco conglomerate NTT made an offer to buy Dimension Data; the take-over was recently given regulatory approval.

The next story was banking giant HSBC’s offer to buy Old Mutual’s controlling stake in Nedbank.

The last story, which came out yesterday, was the US retailer Wallmart announcing it was looking at buying Massmart.

This seems to be a sign that Africa’s economic growth and potential is at last being recognised by more than just mining companies.

On the down side, there are some concerns about international companies buying local ones that are listed on the Johannesburg Stock Exchange (JSE), as this reduces the size of the local stock market, especially as the companies being bought are major entities on the JSE. On the plus side, it’s a sign of the recognised excellence of the SA companies and that their experience is critical to strategies that involve entering the larger African market.

Feel free to make your comments about these acquisitions here. I wonder if this might start big international software companies from thinking that a territory called EMEA (Europe, Middle East and Africa) is appropriate, but instead have Europe, Middle East and Africa as separate divisions.