Thula Thuli, thula?

A letter the nation should be writing to the Public Protector.

Our Dearest Thuli Madonsela,

We hope we are forgiven for using the plural in the salutation and the impudence to address you in an open column. But we simply cannot imagine there being more than a handful of people who do not share deep admiration and gratitude for your courage.

We heard on the radio this week, some analyst predicting that your latest spat with the powers that be will be your last. In taking on number one, he implied, you were inviting as much of number two as you could have found at Cape Town airport and the city’s official buildings not so long ago. This was before your soothing reassurances at a media briefing this week and yes, we know! Yet another analyst with some provocative outburst to capture attention in the hope that he will not be overlooked when next some junior reporter is using his “dial-a-quote.”

Decades ago “analysts” were restricted either to those chemistry fellows with thick lensed spectacles hidden in basement laboratories, or were sectoral specialists in broking firms. Now you find them in economics, politics, law, international relations and many more; as if every fibre of our society needs half-baked analysing based on equally half-baked research of some highly suspect data. Whereas what this country really needs are more psychology analysts to identify, analyse and treat the growing number of psychopaths and sociopaths that are consistently in our faces, homes and wallets.

But even if we take that analyst’s prognosis with a pinch of salt, it was enough to jolt most of us out of pre-conscious morning slumber. Could the tilting of your sharp legal lance, albeit some may say in an overly polite and wary manner, at the highest in the land turn out to be Quixotic and the prelude to your swan song? And will this not be the final leap into autocracy and authoritarian rule?

And then you have those who feel you were too contrite. Okay, it was only one reader that received some prominence for this view in a letter to Times Live. Can anyone really know what that inner spark is that heroes like you have?

In the mist of all the clamouring chirps, the bouquets and the brickbats, the encouragements and the discouragements, the friends and the foes that surround you, is a human being that at times must experience the task as being very lonely and onerous.

It may help to realise that just as solidly behind you is that clichéd silent majority. Many may not even know of you and some only vaguely so. Whenever public servant misbehaviour is discussed, someone is bound to mention that “Thula Lady”, blissfully unaware of the ironic confusion of your name with that serene and nostalgic Zulu lullaby that silences infants.

It may be ironic, but not totally inappropriate. Often when we see your mild-mannered and soft spoken discourses in broadcast interviews, we are reminded of that memorable event many years ago; when Archbishop Desmond Tutu embraced and covered with his cloak a young man fleeing from burning tyres born by a frenzied mob. As a lawyer using law to stop the lawless, (albeit with a velvet glove) there is little difference between what you are doing and the bishop’s robe, or the reassuring lullaby.

What is perplexing is that in your on-going war against corruption and acquisitive terrorism, you had to be drawn into the whole Nkandla affair. The spending of about a R¼-billion rand on a presidential palace, homestead, compound, fortress, laager, kraal, or whatever palatable “security” spin one wants to use in the midst of abject poverty, chronically empty bellies, poor schools, and poorly resourced health facilities is so self-serving, ostentatious, outrageous, hypocritical, bizarrely ironic and so patently unfair that it surely must gather a momentum of its own, a civil protest on its own, and an inflammatory spark far greater than e-tolls or labour brokers – unless our priorities are distressingly warped.

Hypocrisy is a king with no clothes. There must come a time when even the child sees that.

At the very least, may this not divert your and your team’s efforts from the much bigger task of building an anti-corruption and anti-misappropriation wall out of the many bricks of lesser known but equally detestable misbehaviours. Those that make up the estimated R30bn loss to the public annually; those that you recently described as having reached crisis levels; those that make Transparency International rank us 69^th out of 176 in global corruption perceptions, and those that go on unabated as evidenced in the latest Auditor General’s report. Despite President Zuma’s assurances, the corruption glass should never be only half empty.

At the same time and giving credit where credit is due, the constitution, the existence of your office and others, and the undeniable reality that exposure of corruption increases public perceptions of its pervasiveness do give some solace.

Even amongst us the grateful, there may be a few sceptics who will question your deeper motives. Let that not concern you. You are our Joan of Arc. History will treat you kindly. Whatever transpires, and whatever your future holds, your task is far from done, dear Thuli.

May you continue to sing your reassuring lullaby for years to come.

Under the dome.

When the small blame the big for their smallness.

Followers of TV series will no doubt recognize the title. It alludes to that Stephen King sci-fi series in which a small American town is enveloped in an invisible dome that some alien force created to protect a mysterious butterfly cocoon.

The dome was impervious to any onslaught, including nuclear devices, and created the setting for producers to fall back on the old themes of good versus evil, black hat against a white hat, and villain against hero in portraying the behaviour of the town’s residents. And of course, in true “who shot J.R.?” style, the series exasperatingly ended with the hero at the point of being lynched when the dome came down.

Being a sucker for a good metaphor, my attention was fully captured by an anonymous e-mail from “Swellendammer”, a local with an axe to grind against the Sentraal Suid Co-operative, commonly called S.S.K. He likened the doings of this agricultural co-op and dominant force in the Overberg district to that of the enforcers of the dome, stopping short of accusing the organisation’s leaders of being the big black hatted villains lynching the small business heroes.

He asserts that the size and power of SSK and the number of its tentacles that stretch into every activity in South Africa’s third oldest town and beyond is an unfair obstacle in ensuring the livelihood of many other small and struggling businesses. Those tentacles reach into retail of produce, hard and soft goods; credit provision, hardware, arms, clothing, property, liquor, motor sales and repairs and many more. The co-op is the major shareholder of the town’s largest shopping mall.

All of the above is in addition to the co-op’s and its subsidiaries’ core businesses of supplying products and services to farmers, oil extraction, refinement and marketing; and animal feed production. On top of that SSK has just absorbed the interests of Mosselbay’s Tuinroete Agri Ltd (TRA) which increases the co-op’s presence from Robertson in the West to Plettenberg Bay in the East, and will boost the group’s annual turnover to about R2bn with the co-op itself contributing at least half of that.

Not willing to let go of a good metaphor and with the merger hot off the press, I decided to explore the David versus Goliath theme and forwarded Swellendammer’s mail to SSK. Within an hour I received a reply from its Finance and Administration GM, Villiers van Veen suggesting a personal meeting.

The first thing that struck me was the modest co-operative head-office, housed in an old two story building that somehow belied the co-op’s R800-m assets, and contrasted sharply with those majestic foyers that hallmark the Sandton premises of financial institutions that I used to frequent regularly. Van Veen himself is equally incongruous. He is a refugee from those very same august Sandton premises, where he used to be an investment risk specialist and asset manager. He took flight, he says, from a seemingly meaningless life to become involved in his first passion, agriculture. In his current position he has joined a group that can be described as visionary co-operative trail blazers.

A one-hour appointment became two hours of animated discussion and I left convinced that SSK represents much more than a co-operative or a different way of doing business. Within this, one of the oldest (founded in 1931) and biggest agricultural co-operatives in the country, lies a business model that is fresh yet very old, that is unique but the same and that is definitive proof that the oldest economic principle known to man – that of adding value to other’s lives – is the ultimate foundation of what all transaction should be about. It is the only valid source of tangible wealth creation.

The potential of co-ops as an alternative to private and public companies in creating sustainable wealth and employment has long been known and it’s a subject I will have to return to in a future article in the broader context of agriculture, labour and others. To determine what has made SSK successful where many others have either failed or converted to limited, profit driven companies, one has to reveal the human story against the metrics. The only way to do this is to examine its Contribution Account extrapolated from the Value-added statement in its latest annual report.

What is clear from the outset is that no-where in essence does the co-op transgress sound business principles of efficient use of capital, maximum productivity and competitiveness against some very big actors, including discount retailers and other agricultural suppliers . On some of the social dictates such as CSI and BEE it is ahead of its equity based peers. Its operational model is a mix of trading, processing and manufacturing and of every R100 of supplies it uses from others, it adds R14 value. This may appear small, but it hides the exceedingly important feature of the enabling and empowering relationship with those suppliers, a large part of who are local, albeit incestuous in some instances.

More than half of wealth created goes to employees and 7% in cash to its owners. This is part of bonuses based on a member-ownership structure in which all of its nearly 1000 members have the same number of “shares”, big or small, old or recent as long as they can prove being part of the agricultural value-chain. These bonuses are calculated on members’ dealings with the co-op itself and only 20% is paid in cash and the rest ploughed back into the co-op. This accounts in part for the large 38% allocation to savings and in turn its vigorous local capital expenditure in agricultural infra-structure which also explains the relatively low tax share of wealth of 2%.

This is a fairly marked deviation from conventional corporate capital behaviour where they sit on billions of reserves and seek short term returns in non-core speculative investments. Farmers baulk at such trifling things!

Apart from access to Landbank capital, for which SSK has to jump through onerous hoops, and which is used to fund farming ventures of its members, SSK has proved that a co-op needs no special treatment – not from government, society, consumers or business. It does have its complexities and intricacies and hurdles in its founding have been huge compared with a normal company. Van Veen relates with a touch of emotion and pride that these were overcome with sacrifice, patience, prudence and perseverance – the antipathy of the accepted behaviour of most companies today.

But its real success lies in a very, very simple principle: its owners are also mostly its customers and servers are served. It encourages above all else full appreciation that its existence is dependent upon the value it adds to others.

So in answer to Swellendammer, I could find no evidence that SSK represents a malevolent monopolistic dome. Indeed the opposite: without it this region would be very much the poorer. SSK’s growth and size is less of a threat to the community than it is to itself. In growth and takeovers of companies it is perhaps treading unchartered waters for a co-operative. Large assets and huge turnovers become a potential breeding ground for greed and predatory behaviour, the nemesis for an institution that relies heavily on the patience and goodwill of its participants. It becomes increasingly difficult to resist the temptation of changing to a limited company and converting its members’ interests into tradable equity.

We all have a special empathy for small business, the small supplier and the mom-and-pop ventures. But another of Boetcker’s “cannots” says: “You cannot strengthen the weak by weakening the strong.”

For whom the roads are tolled.

Why the user-pays argument for e-tolls is invalid.

There was more than a touch of unintended satire in Agriculture Minister Dipuo Peters’ comparison between paying a toll for the use of roads and depositing a coin in a facility where you want to deposit something else.

Many jesters have had a field day with that postulate, which no doubt must have attracted a snigger or two from the august gathering of the country’s top business practitioners that she was addressing. It revived a vague memory of some graffiti I saw on the door of such a facility many decades ago that read: “Here I sit, sick and dishearted (sic); I paid a penny, and I only farted.”

Another dating to the same era when pennies still had value, I adopted as a childish chant: “If you want a wet surprise, pull the chain before you rise.” That only makes sense if you can remember the days when you were forced to sit under the threatening weight of a huge cast-iron cistern, from which a long chain was suspended to perform a very loud thumping flush. In those days they were mostly consigned to outhouses as a step-up from long drops. The reason was simple: if you had one in your home and someone in the household was having a metabolic nightmare, the entire extended family would have a sleepless night.

I’ve always studiously avoided taking issue with many of the ludicrous utterances on matters economic of our politicians from all persuasions. There are just too many of them and mostly their dripping irony and risibility needs no highlighting. It’s only when they are uttered in defence of official policy and represent a terrible twisting of basic economic logic, that it becomes much more than some fertile material for a verbal cartoon.

For one thing, and this purely as an aside, it does not take an accounting genius to know that the coins used for relief in a public loo can never cover the cost of building and maintaining those facilities. The charges were intended purely to keep layabouts from misusing the cubicles for other purposes such as a night of peaceful repose. It’s a bit surprising that someone has not taken this issue up with the Constitutional Court after not being able to hold it in any longer following a desperate but fruitless search for an appropriate coin.

Perhaps it is time that someone rescues the e-toll debate from heading for the toilet and the quagmire of complexities covering its accounting, fiscal and legal parameters. They have all been well-documented and debated in the public domain. What has not been challenged sufficiently and is the cornerstone of its defence such as Minister Peters has again done is the validity of the user-pays principle itself and its relevance to toll roads.

It’s a very seductive argument, seemingly paying homage to free market principles; holding people to account only for those services they directly use; avoiding inefficient cross-subsidisation of government costs; allowing price to dictate allocation of resources, and avoiding the dirty word “tax”.

That’s the first sleight of hand that must be unmasked. A toll is a tax. It is not a price. In principle it is not very different from VAT, where you are forced to pay if you purchase. A road toll is just more specific, confining that tax to a more specific purpose. But it is still coerced, unilaterally and bureaucratically set and not free-moving according to supply and demand. I suspect the whole hullabaloo around e-tolling would have assumed a very different colour had the toll simply been called a “road tax”.

In theory, there’s not much wrong with that. A tax applied for a very specific purpose is arguably much better than where its costs are covered from a massive central account that can hide all kinds of corruption, misappropriation, and inefficiencies. Already our fiscal affairs, controls, allocations and accountabilities are in a mess. The government’s inability to be prudent with general expenditure naturally questions its ability to be so with targeted revenue and expenditure. That’s one of the key issues of the current debate and needs no repeating here.

The principle of user-pays means that the cost of those facilities is covered by the user of those facilities. Investec strategist, Professor Brian Kantor pointed out in Business Report this week that Sanral’s toll structure is not based on cost recovery, but on traffic volumes, implying cross subsidisation of low volume roads by those with higher volumes. He accuses Sanral of blundering by seeing commuters as cash cows.

The deliberate paralleling of the road toll with a legitimate price is highly disingenuous if not deliberating misleading. Pricing is one of the most important principles in economics. It stands on an unassailable and self-evident logic that we all instinctively learn from the day we start swopping marbles. Its primary and vital purpose is to balance supply and demand and move resources to where they are most needed. It underscores the need to keep resource allocation as much as possible in a free environment and out of bureaucratic controls. This does not imply the unbridled reliance on market forces. Markets do not fail; behaviour fails markets, driven by a flawed construct of the role of business, profits, motives, incentives and others, and in turn inviting interventions and social dictates.

Despite the many calamitous economic lessons of the past and present, free moving prices are the one principle that societies flout the most, not only through misguided controls and a contamination of money as a denominator of value, but also through distortions caused by protected monopolies, collusion and other forms of misbehaviour.

Free moving prices are at the heart of legitimate transaction and transactional fairness, of which other pillars are maximum choice and optimum number of alternative suppliers, as well as broad consumer awareness.

At various levels, toll roads simply do not meet the conditions of legitimate transaction.

The casino next door.

Have we created a dual economy of gamblers and others?

One does have some lighter moments even in the weighty world of economic journalism. At a pre-budget briefing long before many of my readers were out of high school, a battery of the country’s top fiscal and monetary policy makers spent some arduous hours with the financial journalist elite going into the finer details of the upcoming budget.

At question time, one of our colleagues got to his feet and asked: “Mr Minister, what does all this mean?” What followed was a stunned silence, until the school masterly Reserve Bank Governor, Dr Gerard de Kock, was instructed to take the confused fellow aside and brief him privately on fiscal affairs. It turned out that he was a junior sports reporter who had been assigned to cover “some meeting” at parliament.

Sometimes the simplest questions are the most difficult to answer, taxing not only your understanding of the subject, but the basic and self-evident logic that should underpin it. Which may explain why many “experts” are not only a bit at sea when it comes to explaining the complexities of our modern financial state, but often disagree about its detail and where it is headed.

Such as: what will happen when the deadline for raising the U.S. debt ceiling runs out? Can the world sustain mushrooming debt without avoiding a massive global depression? Or: with constantly increasing government debt and historically low interest rates why is there no rampant inflation? Related, but just as important questions ask why have low interest rates and government spending not encouraged stronger economic growth and job creation? Why are income disparities at socially unsustainable levels? How can the global economy sustain an exchange system based on increasingly worthless paper?

Try answering those questions at a family braai, and like that posed by a junior sports reporter, you revert to stunned silence. But I take some solace in the fact that even some of the world’s economic elite are not confident of their analyses and predictions. They range from the world heading for a depression; heading for hyperinflation; or both depression and inflation implying unprecedented stagflation; or – as the mainstream guru’s seem to believe – modern monetary management possesses the tools and instruments to keep the ship on a course that will gradually extricate it out of current turbulence onto a growth path where budget balances will be restored, debt repaid, and surpluses and prosperity created once more.

Frankly, despite lofty titles, I don’t think anyone really knows. The conflicting views themselves reflect a global economy that is in unchartered waters. Growing unease can reach a point where faith is lost in those instruments and the ability of those using them -- to ignite a spontaneous reaction from the broad masses that have always marked great economic calamities.

The cracks are severe and it may take little more than the jitters surrounding the running out of time for the U.S. Federal government to raise the debt ceiling on the 17^th to trigger a run on the world’s biggest reserve currency and spontaneous de-combustion.

That uncertainty is based on a break with logic and wisdom that has informed our economic lives since Adam Smith. In effect we have created two economies: a money economy and a real one: a casino next door to a productive economy.

Analogies contain a huge risk of oversimplification, but it is an appropriate way of illustrating the human story in the midst of the complexities of the money mischiefs that have become the predominant driver of our socio-economic destiny.

The main casino is in the United States, with “satellite” operations in many other parts of the world. The owners of the house consist of the American Treasury, the Federal Reserve Board, and the operators, croupiers, card dealers and gamblers themselves made up of banks, stock markets, investment houses, and many others. They issue their own chips on players’ markers from a seemingly endless supply and in an incestuous exchange environment. For the most part, those chips stay in the casino, making a select few winners extraordinarily wealthy.

But there are two major problems: those chips are not little round plastic discs, but are indistinguishable from ‘real” money; and eventually they have to be covered from incomes earned in the real economy. The same way that a casino mesmerises its patrons into believing that wealth can be created at the press of a button on a slot machine or being dealt a good hand of cards, the world has placed that casino at the centre of fiscal and monetary policies and has made the destiny of the real economy dependent upon it.

It should, of course, be the other way around. Real and tangible wealth can only be created in the production of goods and services exchanged with fellow human beings. Real money, if not anchored in something of tangible value like gold or silver, and even if it is based on government backed I.O.U.’s, has to be balanced by the equivalent value of those exchanges. In time, that debt has to be paid for, either by income earners or taxpayers. Postponing that repayment simply by rolling it over, raising a debt ceiling, or borrowing money to pay due debt is nothing more than a giant Ponzi scheme.

The casino analogy explains many of the imbalances and disconnects that have developed over the past few decades.

As long as the chips stay in the casino and are not allowed to inordinately contaminate “real money” in the real economy, inflation can be contained. It’s become part of monetary policy to “manage” that contamination either through interest rate manipulation or releasing chips -- to encourage economic growth or maintain price stability. Its ability to do so over an extended period is, however, being seriously questioned. One statistic that puts this in perspective is that the value of trading in casino chips is now about 18 times more than the value of goods and services traded in the real economy in a year.

It explains widening income disparities, jobless economic growth and the absence of a tangible “trickle down” effect, where the demand for goods and services by the rich should be passed on to others in the form of wages and salaries – what’s happening in Wall Street, it is said, is not happening in Main street.

Low employment financial services form a major part of GDP in many developed countries. It is 25% in the United States, compared with 15% in high employment manufacturing. There are just too few who benefit from these activities to have a tangible effect on demand for goods and services – that’s if they are willing to part with their chips elsewhere but in the casino.

It explains too the disproportionate growth in profit relative to the wage and salary share of wealth. Shares are part of the casino, pushing many share prices to inordinate levels unwarranted by the subdued economic environment. In turn this inflates shareholder expectations of earnings to beyond reasonable price/earnings ratios with the inevitable outcome of containment, including labour’s share of wealth.

There are many more. It may not be the most suitable analogy and avoids the complexities of how the casino itself operates. But then, what else do you tell your friends at a braai?

Their guess at the outcome is as good as mine – indeed as good as those who profess to know.

The chicken run

Does Minister Davies know something many small poultry producers don’t?

Not more than 20 meters from my idyllic rented farm house nestled between the slopes of the Langeberg Mountains and the Breede River is a forlorn abandoned chicken run.

It’s a nostalgic shrine to fruitless attempts at self-sufficiency -- that deep and irrational urge that tugs at one’s conscience in troubled times – when politicking can stymy one of the world’s biggest national budgets; when a debt laden populace loses faith in its means of exchange; when poo is thrown in protest and when violent political springs are sprung.

That chicken run played no small measure in my decision to become an urban refugee. I had comforting visions of roosters heralding the dawn and copious feasts of eggs and drumsticks harvested from scores of fowls running freely in the considerable expanse around the renovated “opstal”. The potential abundance could be shared with friends and neighbours in exchange for cabbages and corn, offsetting potential protein overload.

What followed was a long and sorry struggle. First we discovered that our locally acquired motley clutch refused to seek refuge in the badly fenced run, let alone the decades old zinc chicken house. Attempts to get them to lay eggs in nests fashioned from plastic crates were fruitless. They chose rather to hide their passion fruit under thorn bushes and stinging nettles in the surrounding hectares and sleep in trees to show us that contrary to popular belief they can be quite accomplished fliers. Catching them for the table was beyond any geriatric capability.

Then came the day that one of our pet Jack-Russells proudly dragged in a headless carcase, followed soon by another, and then another. Disbelieving that nature could be so wasteful, we concluded that it was our two spoilt Jackies who had lost the art of hunting for food, emulating humans in killing for sport. Our decision to let them go was supported by their over-zealous appreciation of freedom to disappear for days and form packs with other dogs in terrorising everything that moved in the area.

We had little time to mourn their departure, before we found another carcase in the same headless, blood-drained state – and then more until our clutch of fifty or so was reduced by half. The Draculas were none other than fat otters from the Breede River, already overfed on guinea fowl. So like humans, our fowls were imprisoned in the name of freedom. Free range became semi-free behind a fenced 500 square meters of fertile bug and foliage carrying land. The house itself was cleaned and renovated but retained its original reed and bamboo fixtures which clearly had served its previous inhabitants well.

Then they all got sick. We thought they were overwhelmed by the loss of their freedom and were going through the four stages of grief. But then one died and soon all were gone apart from the wily old rooster. It took a local to inform us that they died of anaemia caused by blood sucking lice. The tiny creatures were dormant for years in fixtures we preserved in a misguided salute to bygone days.

At the grave of our dear departed feathered friends, we resolved to “do things properly”. The fence was replaced with costly professionally installed 1.8-m high heavy gauge jackal wire and the “hok” stripped, refitted, debugged and repainted with bitumen that’s the nemesis of any creepy crawly.

Without costly machinery, slaughtering would be a hurdle, so I studied various means of killing, de-feathering, and dressing to prepare them not only for the pot, but perhaps sell to the local mom-and-pop stores. The best, clean and bloodless method, Google informed me, was to stick a steel knitting needle in the beak and shove it into the miniscule brain. But one clearly mellows with age, to the point where one is repulsed by the killing even of sworn enemies such as spiders and snakes. The decision on slaughtering was postponed – indefinitely it turned out.

Our run was restocked with a mixture of 3 month old layers and broilers purchased and transported from Malmesbury and each costing as much as a dressed fowl in the supermarket.

Then we again found a headless carcase, and the carnage resumed. Those fences may have kept out otters, but not local musk cats and mongooses that burrowed under the fence and found other forms of entry. The run was fortified with below surface chicken wire.

And then came the hawks. They would swoop in and claw at our precious poultry before realising that not even their splendid wings could lift their prey, leaving a dead bird behind. We planted a long pole in the centre and suspended nylon cord from it to the fence, attaching blank cd’s at various intervals to blind their superlative vision. It did not deter their entry, only their exit, leaving us with a terrible conundrum of dead fowls and trapped predators. We covered the larger gaps with fish net and the hawks gave up. So did the otters: mongooses, musk-cats, ferret cats, meerkats, stray dogs, and the occasional wine-fortified human.

What finally killed the venture was economic. Having denuded their semi-free range of all goggas, creepy crawlies, and foliage, our expensive clutch had to be fed from locally bought crushed mealies, the price of which doubled to R60 for 10kg in less than a year. The ROI simply did not warrant the venture, including its rustic value of outside moving wall-paper and a nostalgic crowing at dawn.

So when Trade Minister Davies asks “If we can’t produce chickens in South Africa then what can we produce?” I am deeply mortified and have to hang my head in shame. My attempts were clearly unsustainably amateur. Perhaps I should try again after giving him a call. Perhaps too, he can pass on that something he clearly knows that many small, cottage producers might not, adding advice on combatting infectious diseases such as bird flu; quick, clean, inexpensive and precision slaughtering and dressing; avoiding health risks and coping with rising feed costs.

But one part of his question I can answer -- what we can produce.

Those things that we are good at; that we can competitively excel at. Those things where we can create more productive jobs; that will earn us the income to afford cheaper imported poultry that is the primary source of protein for the vast majority of South Africans and that do not burden beleaguered consumers with tariffs that only fill government coffers and protect domestic inefficiencies.

If we cannot compete in a race, we should not run in it but rather enter those where we can, and not handicap runners in the former. Of course it is not that simple in the dog-eats-dog world of international trade, rife with tit-for-tat protectionism. But the underlying principle is sound. We have to learn that we should always act in the interests first of the customer not the producer; the buyer, not the seller.

The world has had enough of commercial xenophobia and protecting the interests of a relatively small group at the expense of the consumer.

Phiyega’s real problem.

Not appreciating the difference between management and leadership.

Just how much egg can one face take? If that metaphor is applied to Police Commissioner Riah Phiyega, then her head must surely resemble an omelette. Her litany of personal faux pas since taking office needs no repeating here and her positive spin of “crime is under control” on the latest crime statistics is just another reflection of an imprudent reliance on her management team to guide her on public pronouncements in her attempts to confirm her status as South Africa’s top cop. Others described those figures as “the worst in ten years”.

The statistics themselves have always been highly controversial and suspect, and have again led to Disraeli’s famous assessment of “statistics and lies” featuring in a number of headlines. They have scant credibility globally and in South Africa far more so because of a lack of expertise and effectiveness in reporting, gathering and interpretation. Yet they could have been the ideal platform for the Commissioner to demonstrate true leadership.

I can think of no other position in South Africa that is in greater need of decisive and inspiring leadership than chief of the police force. Perhaps that need even outranks the presidency itself. One is tempted to overlook Phiyega’s stumbling attempts at her job because she really has had a baptism of fire. But that disguises a more fundamental issue – was her appointment the right one in the first place? She and no doubt those who appointed her, defend the appointment on her track record as a “top manager” in the corporate sector. She herself has professed that there is no difference in managing an organisation like SAPS and a big bank.

This inevitably reminds us of the failed two year experiment in recruiting a top manager from the private sector to “shake up” the police services in the late 1990’s. That was none other than the “boykie from Britz” Meyer Khan, who had a stunning record as South African Breweries chief. Repeating that experiment with someone of a different colour and gender is something of a mystery.

We see it too often in many organisations, including companies and large corporations – a failure to distinguish between management and leadership. There certainly is a huge difference. Broadly speaking, one manages things but one leads people. But those criteria are not always clear cut. One can, for example, manage things around people that motivate and inspire them, creating an image of inspiring leadership. In addition, one can learn certain skills that are required in leadership that can support a profile of being a good leader.

Indeed, the “art” of leadership is the subject of countless books, treatises, colleges, universities, and is an important component of organisational theory. Leadership Consultancies abound everywhere, and “leadership interventions” are the order of the day in many organisations.

Biographies of great leaders both in the public and private sector from Genghis Khan (no relation to Meyer) to Winston Churchill and from Henry Ford to Steve Jobs are all eagerly devoured by aspiring young executives. All are looking for that magic and seemingly elusive quality that will propel them to the top.

One would think that if leadership could be taught or nurtured, the numbers of skilled and qualified leaders that are churned out by educational and training institutions would ensure an adequate supply of competent leaders in all of our institutions – apart from the political arena that has a completely different dynamic susceptible to all kinds of contaminants that blur the important difference between being a good politician and being a good statesman or woman.

Yet the most common lament in virtually all spheres of society is the dearth of leadership. In my consulting days, I was intimately involved in the subject through the work of my brother, Etsko Schuitema, who developed our care and growth model after extensive research in the mining industry. In essence it was not very different from the Servant leadership model developed by Robert Greenleaf in the early 1970’s and which became a popular framework world-wide. In addition, I was an avid reader of leader biographies.

Learning leadership skills and emulating leadership behaviours such as those expounded by Stephen Covey are important. But there is something in the makeup of the outstanding leader that is elusive and often not transferable in time, place, circumstance and sector. The best any institution or business can do is to be on a constant lookout for those qualities and give them the opportunity to lead without encumbrances – something most institutions are simply not equipped to do or prepared to risk. Mostly those that have these qualities cannot be bought – a feature that seriously questions our executive pay models and recruitment processes.

On reflection these past few years, when I am asked what makes a good leader, a perhaps highly inappropriate if not flippant image that comes to mind is from that 1965 movie “King Rat”, in which a nondescript prisoner of war gains power, respect and the adulation of his fellow inmates above that of senior officers through his black market enterprises, including disguising rats as other forms of protein. After the prisoners were liberated, he returns to obscurity.

The question is can and when will Riah Phiyega pull a rat out of a hat.

Monthly and Quarterly indicators.

Some important measurements to look out for.

Remember the theory of reflexivity in economics? It was one of George Soros’s pet subjects which the controversial hedge fund guru developed to explain his approach to trading.

This may be an oversimplification, but essentially it implies that trading is largely based on individual biases that ultimately form self-fulfilling prophecies. This has an inherent danger of disregarding economic fundamentals, or put even more simply, having a herd of traders shape the economic destiny of a country within an environment of short-termism and nano-second electronically generated trading.

Trading today is constructed on a number of “triggers”, such as daily, monthly and quarterly indicators and statistics, agency ratings, routine events such as interest rate announcements, statements by authorities or experts, deviations from expectations, tips, rumours, bad lunches, and “gut feelings”.

On top of that, these triggers themselves are not immune to massaging, insider trading, fraudulent manipulation as we saw with the LIBOR scandal, and simple downright mistakes, absence of context and misinterpretations, highlighted recently by economist Mike Schussler in his significant spat with Stats SA.

And that madness is what controls your economic destiny.

Or does it? It all comes down to that basic interplay that I dealt with in a recent article, between the measurable and immeasurable; the way we calculate and the way we behave; the way we think and the way we feel. And within that interplay, a very large measure is within our own control – the key attributes of which are awareness and resolve, or perhaps knowledge and patience. Those, over a longer term are far more powerful in shaping one’s destiny than following a manic-depressive herd. They also provide a deeper level of serenity and an ability of keeping cool while others flay about in frenetic frenzy.

Of course, very different rules apply if your approach is short-term trading or longer term investing. The dangers of the former are legend, yet many are drawn into that casino by large and quick returns that are promised in irritating pop-ups on various internet sites. Inevitably, most fail. A number of people I know carry significant scars from such gambles.

While a solid argument can be made for the view that behaviour drives our economic destiny, structures, systems, policies and measurements, it is clear that the latter also strongly influences the former, creating a circular relationship between cause and effect. So investment, as opposed to short term speculation has to be informed by these measurements. But they also have to be useful in guiding many aspects of economic life, such as when to extend or reduce debt; buying or selling a home; changing jobs and many more.

We are overwhelmed by hundreds of such indicators, each with their own relevance in time and place; all interrelated and yet at times conflicting and reflecting mixed signals. Too often essential context is missed in the reporting, not only in critical detail such as whether the metrics have been smoothed or seasonally adjusted to eliminate aberrations, but the strength of their influence and validity of comparisons.

If you are a glutton for statistics you can have a feast on the Bulletin of Statistics published quarterly by Stats SA. However, some other very important indicators are sourced by other government bodies such as the Reserve Bank and SARS.

Like the daily indicators I dealt with previously, I believe that if you become familiar with just a few of the essential monthly and quarterly statistics and indicators, you will have the critical tools to put all of the others into context and have the essential ingredients for sound investment and other economic life decisions.

GROSS DOMESTIC PRODUCT (GDP). Everyone is obsessed with this measurement. It reflects the total value of goods and services produced in a year and is released quarterly by Stats SA. “Economic growth” means simply changes in this number compared with the previous year. I personally believe it has some severe flaws, over and above the interpretation traps that Mike Schussler alluded to, but that will be an article on its own. Flawed or not it triggers a number of important assessments and decisions in board rooms, international rating agencies, foreign and domestic investors, government, the Treasury and the Reserve Bank. In turn these influence a very wide spectrum of our economic lives such as jobs, interest rates and taxes. Many of the routine monthly and quarterly statistics are components of GDP so GDP is a good composite reflector of economic performance as a whole.

COMPOSITE BUSINESS CYCLE INDICATORS. (BCI). This is a surprising omission from general coverage of economic indicators. Published monthly by the Reserve Bank, they come in three self-explanatory separate parts: leading, coincident and lagging. The strength of the leading BCI (which can be found on this page of the SARB website) is that it is a 12 to 15 month predictor of future trends. In addition, its 12 components capture not only the most important monthly indicators that receive far greater individual coverage, but also some of the mood measurements such as business confidence.

PRICE TRENDS. We’ve all heard about the Consumer Price Index (CPI) which is published monthly by Stats SA. I’ve yet to meet anyone who believes that their cost of living has increased in the past year by only the 6.4% measured in August. That’s the trouble with averages – no-one is average! But its veracity is vehemently defended by Stats SA and that aside it has a key influence on our economic life such as on wages and salaries, jobs, interest rates, and taxes.

An earlier indicator of price movements is the Producer Price Index (PPI) which is also published monthly by Stats SA. The PPI tracks the rate of change in the prices charged by producers of goods.

The major factors that drive prices in an economy are: labour (wages and salaries) capital (interest rates and profit expectations); government (taxes and municipal rates); electricity (Eskom tariffs); fuel and other imports (the Rand exchange rate).

FOREIGN TRADE. To the chagrin of many a politician, we are an “open” economy, which means that a significant source of our economic welfare comes from trade with others. The key indicator that has to be included in a basket of monitoring measurements is the current account of the balance of payments (BOP) published by the Reserve Bank. This comes in two components, of which the most significant is the Trade Balance published monthly by SARS. It reflects the difference between the value of our exports to and imports from other countries in physical goods. The other component of the current account is the exchange of services such as insurance, dividends and interest paid and received, but trading in physical goods is the overwhelming number in the current account. An important part of the balance of payments is the capital account, drawn down by trade deficits and topped up by surpluses as well as reflecting foreign investment flows.

Foreign trade impacts directly on many economic factors such as jobs, prices and the exchange rate. A sustained deficit ultimately puts pressure on the flow of capital which in turn puts pressure on interest rates.

PURCHASING MANAGER’S INDEX. (PMI). This indicator has become a keen favourite for many economists since it was launched in 1999. Also known as the Kagiso PMI, it is viewed as perhaps the best early signs of economic trends, and is based on a monthly survey amongst purchasing managers in manufacturing. While manufacturing itself forms only about 15% of GDP, the sector is the most sensitive to underlying forces in the economy. So of all the other sectoral measurements, surveys and indices, the PMI arguably trumps them in relevance.

Of course there are many more measurements that could be included in your own economic telescope. In keeping with the intent of restricting a dedicated following to just a few of the most significant, I would stick to the above five. Get to know and understand them, and follow them regularly and you will have a better grasp of economic events around you.

At least you will have more confidence in not following the whims of the hysterical.