The Financial Industry Regulatory Authority said on Thursday that it had fined Barclays Capital $3 million for misrepresenting information about subprime mortgage securities the bank had sold from 2007 to 2010.
Finra, as the nonprofit self-regulator is known, said in a statement that Barclays Capital had provided inaccurate data about the delinquency rates of mortgages packed into three securities. The misrepresentations “contained errors significant enough to affect an investor’s assessment of subsequent securitizations,” according to the agency.
That data was then referenced for five additional subprime securities, the agency said.
“Barclays did not have a system in place to ensure that delinquency data posted on its Web site was accurate,” J. Bradley Bennett, the agency’s enforcement chief, said in a statement. “Therefore, investors were supplied inaccurate information to assess future performance of RMBS investments.”
Barclays Capital neither admitted nor denied wrongdoing, though it consented to the fine. A spokeswoman for the bank declined comment.
Finra has fined several investment banks in the last two years, including Merrill Lynch and Credit Suisse in May and Deutsche Bank in July 2010.
Source: New York Times
Thursday, December 22, 2011
Sunday, December 11, 2011
Durban and the search for climate justice
The COP17/CMP7 summit in Durban which concluded on 11 December reached decisions that can move us towards a legally binding agreement to halt and reverse the path we are currently taking towards catastrophic climate change, but the hopes for a substantial deal on emissions reductions have not been realised. The international community must find an accord with the ambition to limit the global temperature rise to a maximum of 2°C or 1.5°C above pre-industrial levels, which remains the only possible solution to the dangers faced by the world.
In establishing the Ad Hoc Working Group on the Durban Platform for Enhanced Action, the conference rightly concluded that any future agreement on climate change must be legally binding, referred to officially as "an agreed outcome with legal force". It is now more vital than ever that negotiations continue without delay and in a spirit of compromise and understanding in order to make these goals a reality, as the cost of postponing such an agreement grows with every passing year.
With Durban, the framework is also now in place for the operation of the Green Climate Fund with the approval of its Governing Instrument, although long-term sources of financing for the Fund have yet to be finalised. The decision launching the Fund addresses the need to balance the allocation of resources between adaptation and mitigation activities, which is in line with the Socialist International’s call in Johannesburg at the end of October this year.
A positive step is also the commitment that a mechanism for technology transfer will be fully operational by 2012 to "promote and enhance the research, development, and deployment and diffusion of environmentally sound technologies for mitigation and adaptation in developing countries".
We congratulate the South African hosts for showing the leadership and perseverance to obtain these and other agreements, but we are under no illusions that there is much hard work ahead of us all.
It must be acknowledged at the same time that some of the commitments we were hoping to see in Durban on deepening and formalising pledged cuts in emissions, as outlined in the declaration of the Socialist International made in Johannesburg, have not been achieved. Equally, much progress needs to be made on policies for the protection of forests, developing renewable technologies and establishing systems for measurement, reporting and verification, and the decisions reached lack the necessary urgency to effectively address the case of the Small Island Developing States (SIDS).
The international community must persevere within the framework of the UNFCCC to come together in a common search for solutions to the greatest threat that currently faces the planet. Multilateralism continues to be the only way forward, with the vast majority of the nations on the planet wishing to see political will match the scientific requirements and no longer willing to accept ‘pledge and review’, with the direct involvement of political leaders in the process crucial to deliver the responses needed.
The Socialist International will continue to place the issue of climate change at the heart of its agenda, starting with the forthcoming Council meeting to take place in San José, Costa Rica in January 2012 and continuing with the work and activities of its Commission for a Sustainable World Society as we head towards Rio+20, COP18 and beyond.
Source: Socialist International
In establishing the Ad Hoc Working Group on the Durban Platform for Enhanced Action, the conference rightly concluded that any future agreement on climate change must be legally binding, referred to officially as "an agreed outcome with legal force". It is now more vital than ever that negotiations continue without delay and in a spirit of compromise and understanding in order to make these goals a reality, as the cost of postponing such an agreement grows with every passing year.
With Durban, the framework is also now in place for the operation of the Green Climate Fund with the approval of its Governing Instrument, although long-term sources of financing for the Fund have yet to be finalised. The decision launching the Fund addresses the need to balance the allocation of resources between adaptation and mitigation activities, which is in line with the Socialist International’s call in Johannesburg at the end of October this year.
A positive step is also the commitment that a mechanism for technology transfer will be fully operational by 2012 to "promote and enhance the research, development, and deployment and diffusion of environmentally sound technologies for mitigation and adaptation in developing countries".
We congratulate the South African hosts for showing the leadership and perseverance to obtain these and other agreements, but we are under no illusions that there is much hard work ahead of us all.
It must be acknowledged at the same time that some of the commitments we were hoping to see in Durban on deepening and formalising pledged cuts in emissions, as outlined in the declaration of the Socialist International made in Johannesburg, have not been achieved. Equally, much progress needs to be made on policies for the protection of forests, developing renewable technologies and establishing systems for measurement, reporting and verification, and the decisions reached lack the necessary urgency to effectively address the case of the Small Island Developing States (SIDS).
The international community must persevere within the framework of the UNFCCC to come together in a common search for solutions to the greatest threat that currently faces the planet. Multilateralism continues to be the only way forward, with the vast majority of the nations on the planet wishing to see political will match the scientific requirements and no longer willing to accept ‘pledge and review’, with the direct involvement of political leaders in the process crucial to deliver the responses needed.
The Socialist International will continue to place the issue of climate change at the heart of its agenda, starting with the forthcoming Council meeting to take place in San José, Costa Rica in January 2012 and continuing with the work and activities of its Commission for a Sustainable World Society as we head towards Rio+20, COP18 and beyond.
Source: Socialist International
Friday, December 9, 2011
Power, patronage and the provinces
Say what you like about the politics of the national government's intervention in three provinces, one thing is clear: a scaled-down analogue of the eurozone crisis is unfolding within the borders of South Africa. Limpopo literally ran out of money three weeks ago, maxing out its overdraft at the Corporation for Public Deposits and exceeding its half-a-billion-rand facility at First National Bank. The treasury had to move forward its payment on one of the province's regular tranches of funding so that teachers and nurses could be paid.
The province blames unexpected increases in civil service wages and the implementation of the occupation-specific dispensation for health workers. These were provided for at central level, but seem to have been implemented amid real confusion and, on a charitable interpretation, unexpected wage payments in a context of rampant corruption and mismanagement may have finally tipped the provincial fiscus over the edge.
The treasury effected a hostile takeover of the Limpopo this week, placing five key departments under administration. To all intents and purposes the province has been stripped of its basic functions. Premier Cassel Mathale is now a figurehead, presiding over a shell of a government run from Pretoria. No doubt the emergency was real and drastic intervention was warranted, but there is no escaping the fact that the move deprives one of President Jacob Zuma's most important opponents of almost all his power and, crucially, of his patronage machinery.
Supporters of Mathale, Julius Malema and Sports Minister Fikile Mbalula are fuming over the coup, which they insist is driven purely by politics. They point to other provinces with large overdrafts and rickety finances that have not suffered the same fate. There is no gainsaying the political advantage secured by Zuma with this move, but Mathale and his government opened themselves up to it by allowing Limpopo's finances to deteriorate beyond the mere mess we have come to expect into real crisis.
In contrast to the takeover of Limpopo moves to stabilise the finances of Gauteng and the Free State, with their Zuma-aligned premiers, look more like friendly bailouts. Gauteng, despite a health service that the treasury described to Cabinet as being in "disarray", will be dealt with via an "agreement" between the province and the national government. And in the profligate, but less disastrous, Free State the intervention is limited to the roads department. Those Gauteng projects that do face major cutbacks date from the tenure as finance MEC of Paul Mashatile, another Zuma opponent. Premier Nomvula Mokonyane, who is at loggerheads with Mashatile, may not be very sorry to see them trimmed or abandoned.
The politics then are real and they are vicious, but so are the impacts of mismanagement, and they stretch deep into other provinces. KwaZulu-Natal and the North West are said by the treasury to be on track for recovery. Meanwhile, in municipalities across the country similar failures are compromising access to clean water, basic infrastructure and housing.
As the treasury warned Cabinet on Monday: "Non-delivery and slow delivery of services poses a security risk for the country." That is a welcome recognition but, if risk is really to be diminished, interventions from the centre will have to move beyond politics.
Source: Mail & Guardian
The province blames unexpected increases in civil service wages and the implementation of the occupation-specific dispensation for health workers. These were provided for at central level, but seem to have been implemented amid real confusion and, on a charitable interpretation, unexpected wage payments in a context of rampant corruption and mismanagement may have finally tipped the provincial fiscus over the edge.
The treasury effected a hostile takeover of the Limpopo this week, placing five key departments under administration. To all intents and purposes the province has been stripped of its basic functions. Premier Cassel Mathale is now a figurehead, presiding over a shell of a government run from Pretoria. No doubt the emergency was real and drastic intervention was warranted, but there is no escaping the fact that the move deprives one of President Jacob Zuma's most important opponents of almost all his power and, crucially, of his patronage machinery.
Supporters of Mathale, Julius Malema and Sports Minister Fikile Mbalula are fuming over the coup, which they insist is driven purely by politics. They point to other provinces with large overdrafts and rickety finances that have not suffered the same fate. There is no gainsaying the political advantage secured by Zuma with this move, but Mathale and his government opened themselves up to it by allowing Limpopo's finances to deteriorate beyond the mere mess we have come to expect into real crisis.
In contrast to the takeover of Limpopo moves to stabilise the finances of Gauteng and the Free State, with their Zuma-aligned premiers, look more like friendly bailouts. Gauteng, despite a health service that the treasury described to Cabinet as being in "disarray", will be dealt with via an "agreement" between the province and the national government. And in the profligate, but less disastrous, Free State the intervention is limited to the roads department. Those Gauteng projects that do face major cutbacks date from the tenure as finance MEC of Paul Mashatile, another Zuma opponent. Premier Nomvula Mokonyane, who is at loggerheads with Mashatile, may not be very sorry to see them trimmed or abandoned.
The politics then are real and they are vicious, but so are the impacts of mismanagement, and they stretch deep into other provinces. KwaZulu-Natal and the North West are said by the treasury to be on track for recovery. Meanwhile, in municipalities across the country similar failures are compromising access to clean water, basic infrastructure and housing.
As the treasury warned Cabinet on Monday: "Non-delivery and slow delivery of services poses a security risk for the country." That is a welcome recognition but, if risk is really to be diminished, interventions from the centre will have to move beyond politics.
Source: Mail & Guardian
EThekwini Mayor Councillor James Nxumalo Officially Introduced The New City Manager
EThekwini Mayor Councillor James Nxumalo officially introduced the new City Manager Mr Sibusiso Sithole to the media at a news conference held at City Hall this morning.
Sithole’s appointment was announced in December shortly after the Council took a unanimous decision that he should take over the baton from his predecessor, Dr Mike Sutcliffe. But this morning he was meeting the media for the first time where he outlined his vision and plans that would take the City forward.
After briefing senior managers at a breakfast meeting also held at the City Hall, Sithole then delivered a similar message to the media- of shaping things up in the Municipality, saying that he was under no illusion that his acceptance of the mammoth responsibility carries with it a plethora of challenges.
“We are keenly aware that the hopes and dreams of millions of people of our City, especially the poorest of the poor and indeed throughout the province and the country as a whole stand either to be realised or deferred through this appointment. Secondly we are not oblivious to the reality that the environment within and outside the Municipality, within which we shall be operating is characterised by volatility and high velocity of changes, which carry with them many paradoxes of opportunities for development and risks that must be managed at the same time,” Sithole said.
He also acknowledged the role played by his predecessor, Sutcliffe for allowing a smooth transition. Sithole admitted that he was inheriting a City that is stable and sound financially and that has set a record for spending on capital and operating budgets, saying that he was also promising to build on the foundation laid by Sutcliffe.
He mentioned 13 issues that are urgent and need to be prioritised. Those issues were:
* To facilitate participation around the Integrated Development Plan and the Medium-Term Revenue and Expenditure Framework, including Tariffs Model and all Budget Policies
* To develop Project Management Framework for accelerating the implementation of sustainable service delivery and human settlement solutions.
* To embark on a process of reviewing the status of the economy of the City and development proposal s to improve the City’s National and Global competitiveness; and institutional models for investment attraction and retention and branding.
* To develop a concept of a City Region with sister municipalities of KwaDukuza, Msunduzi and Hibiscus Coast in particular with a view to facilitating corridor development along the N2 and N3 gateway.
* To define the City’s role in the expansion of the port.
* To table the 2010/2011 Annual Report, which includes the Auditor-General’s report and to facilitating an oversight report around it.
* To finalise the implementation of the Revenue Management System.
* To act swiftly around the recommendations of the report of Manase and Associates into allegations of supply chain irregularities once the MEC of Cogta, Ms Nomusa Dube, has released its findings.
* To review supply chain management processes with a view to find a sustainable broad based black empowerment model.
* To finalise issues pertaining to Durban Transport within the framework of integrated transport system.
* To conclude decisions about AFD loan application.
* To respond to all pending legal issues and contingent liabilities; and
* To work with the Auditor General and the City’s Audit Committee to strengthen internal controls and the strategic and operational risk management process, towards a clean audit outcomes.
Sithole also promised unity in all the people of the City across racial, religious, political formations.
Introducing Sithole to the media, Nxumalo said he is a man with many accolades in Local Government. “As most of you would know, Mr Sithole is not a new comer to eThekwini, and in the Local Government administration. He worked as the Deputy City Manager between 2001 and 2002, and he spent part of that experience as Acting City Manager for eThekwini following the untimely death of Mr Felix Dlamini,” said Nxumalo.
Sithole joins eThekwini Municipality from the Msunduzi Municipality where he was deployed by the Provincial Cabinet as an Administrator; and he has held similar posts at Indaka and uMhlabuyalingana Municipalities.
His local government experience goes as far back as 1996 when he was Deputy CEO and later CEO of the North and South Central Local Council. Between 2003 and 2008 he did consulting work for both public and private sector; including general consulting on Local Government. He has also worked as General Manager: Corporate Services at Umgeni Water.
Amongst the educational qualifications, he holds a
* Master of Business Leadership (MBL): 2009 (UNISA School of Business Leadership);
* Master of Education (Policy & Planning): 1996 (Manchester University, UK)
* Post-Graduate Diploma Industrial Relations: 1993 (Natal University, Durban)
* B.PROC. (Law) 1991 (Natal University, Durban)
Source: eThekwini Municipality’s Communications Unit
Sithole’s appointment was announced in December shortly after the Council took a unanimous decision that he should take over the baton from his predecessor, Dr Mike Sutcliffe. But this morning he was meeting the media for the first time where he outlined his vision and plans that would take the City forward.
After briefing senior managers at a breakfast meeting also held at the City Hall, Sithole then delivered a similar message to the media- of shaping things up in the Municipality, saying that he was under no illusion that his acceptance of the mammoth responsibility carries with it a plethora of challenges.
“We are keenly aware that the hopes and dreams of millions of people of our City, especially the poorest of the poor and indeed throughout the province and the country as a whole stand either to be realised or deferred through this appointment. Secondly we are not oblivious to the reality that the environment within and outside the Municipality, within which we shall be operating is characterised by volatility and high velocity of changes, which carry with them many paradoxes of opportunities for development and risks that must be managed at the same time,” Sithole said.
He also acknowledged the role played by his predecessor, Sutcliffe for allowing a smooth transition. Sithole admitted that he was inheriting a City that is stable and sound financially and that has set a record for spending on capital and operating budgets, saying that he was also promising to build on the foundation laid by Sutcliffe.
He mentioned 13 issues that are urgent and need to be prioritised. Those issues were:
* To facilitate participation around the Integrated Development Plan and the Medium-Term Revenue and Expenditure Framework, including Tariffs Model and all Budget Policies
* To develop Project Management Framework for accelerating the implementation of sustainable service delivery and human settlement solutions.
* To embark on a process of reviewing the status of the economy of the City and development proposal s to improve the City’s National and Global competitiveness; and institutional models for investment attraction and retention and branding.
* To develop a concept of a City Region with sister municipalities of KwaDukuza, Msunduzi and Hibiscus Coast in particular with a view to facilitating corridor development along the N2 and N3 gateway.
* To define the City’s role in the expansion of the port.
* To table the 2010/2011 Annual Report, which includes the Auditor-General’s report and to facilitating an oversight report around it.
* To finalise the implementation of the Revenue Management System.
* To act swiftly around the recommendations of the report of Manase and Associates into allegations of supply chain irregularities once the MEC of Cogta, Ms Nomusa Dube, has released its findings.
* To review supply chain management processes with a view to find a sustainable broad based black empowerment model.
* To finalise issues pertaining to Durban Transport within the framework of integrated transport system.
* To conclude decisions about AFD loan application.
* To respond to all pending legal issues and contingent liabilities; and
* To work with the Auditor General and the City’s Audit Committee to strengthen internal controls and the strategic and operational risk management process, towards a clean audit outcomes.
Sithole also promised unity in all the people of the City across racial, religious, political formations.
Introducing Sithole to the media, Nxumalo said he is a man with many accolades in Local Government. “As most of you would know, Mr Sithole is not a new comer to eThekwini, and in the Local Government administration. He worked as the Deputy City Manager between 2001 and 2002, and he spent part of that experience as Acting City Manager for eThekwini following the untimely death of Mr Felix Dlamini,” said Nxumalo.
Sithole joins eThekwini Municipality from the Msunduzi Municipality where he was deployed by the Provincial Cabinet as an Administrator; and he has held similar posts at Indaka and uMhlabuyalingana Municipalities.
His local government experience goes as far back as 1996 when he was Deputy CEO and later CEO of the North and South Central Local Council. Between 2003 and 2008 he did consulting work for both public and private sector; including general consulting on Local Government. He has also worked as General Manager: Corporate Services at Umgeni Water.
Amongst the educational qualifications, he holds a
* Master of Business Leadership (MBL): 2009 (UNISA School of Business Leadership);
* Master of Education (Policy & Planning): 1996 (Manchester University, UK)
* Post-Graduate Diploma Industrial Relations: 1993 (Natal University, Durban)
* B.PROC. (Law) 1991 (Natal University, Durban)
Source: eThekwini Municipality’s Communications Unit
Thursday, December 8, 2011
Upping the ante, 8ta extends 10GB loss leader
The loss-leading broadband special offer from 8ta, its 10GB of data for R199/month package, has been extended until mid-2012, it said on Thursday. The product, which is only available on a 24-month contract, has been in the market since June.
The 10GB package remains the cheapest capped mobile broadband offering in SA, with an effective cost-per-megabyte of less than 2c. For an additional R100/month, users can get an additional 10GB to be used between midnight and 5am.
It had been expected that the special offer would only be in the market for a few months. 8ta, which is owned by Telkom, is able to offer the low-cost package because, unlike its rivals, its network is still relatively empty. The offer only applies to users in 8ta coverage zones and does not extend to those roaming onto the MTN network.
Telkom launched 8ta, SA’s fourth mobile network operator, in 2010.
Source: TechCentral
The 10GB package remains the cheapest capped mobile broadband offering in SA, with an effective cost-per-megabyte of less than 2c. For an additional R100/month, users can get an additional 10GB to be used between midnight and 5am.
It had been expected that the special offer would only be in the market for a few months. 8ta, which is owned by Telkom, is able to offer the low-cost package because, unlike its rivals, its network is still relatively empty. The offer only applies to users in 8ta coverage zones and does not extend to those roaming onto the MTN network.
Telkom launched 8ta, SA’s fourth mobile network operator, in 2010.
Source: TechCentral
Wednesday, December 7, 2011
Court orders release of asylum seekers
The department of home affairs in Cape Town has been issued with a high court order to release asylum seekers who have been detained illegally. According to ProBono.net, home affairs in Durban and Cape Town have been involved in a scheme where asylum seekers are lured to department offices under the pretence that they should collect documents. They are then arrested and detained before facing deportation.
The Cape High Court on Monday issued a ruling that arrested asylum seekers be immediately released. The department's procedure is usually to give those who fail to qualify for asylum in South Africa a 30-day period during which they should leave of their own accord. Only when this is not done would deportation procedures begin.
The department in Durban was given the relevant documents by lawyers acting for the asylum seekers but authorities allegedly failed to bring them to court and have refused to release the group currently housed at Westville Prison.
Source: Mail & Guardian
The Cape High Court on Monday issued a ruling that arrested asylum seekers be immediately released. The department's procedure is usually to give those who fail to qualify for asylum in South Africa a 30-day period during which they should leave of their own accord. Only when this is not done would deportation procedures begin.
The department in Durban was given the relevant documents by lawyers acting for the asylum seekers but authorities allegedly failed to bring them to court and have refused to release the group currently housed at Westville Prison.
Source: Mail & Guardian
Who is on your side?
CONSUMERS had mixed blessings this year, highlighted by the establishment of the Consumer Commissioner, and some service providers defying the new Consumer Protection Act. Some service providers treated consumers as if the Act affected only those who did business with them. But let's face it the Consumer Protection Act is here to stay and it affects us all. And in many ways the Act wants your business to be successful.
The motor industry has been problematic this year. Consumers complained that they were sold defective cars, and service providers refused to exchange the cars for new ones after failing to repair them as required by the Act. Mercedes-Benz disappointed a customer when it refused to service a car that had clocked 120000km.
The car had only exceeded the serviceable kilometres by 671km and the customer knew that he was allowed a leeway of 1500km to benefit from the motor plan. He almost parted with R21385, but after Consumer Line's intervention, the luxury car dealership reconsidered its decision and serviced the vehicle at no cost. In an extreme case, an official at the Rosebank dealership was accused of assaulting a client, Jolin Majmin, who complained about poor service after paying R17000. Majmin also claimed that his car was damaged after the dealership drove it for more than 70km while it was in their care. Mercedes-Benz SA is still investigating the complaint.
Thanks to Absa for refunding pensioner Nikki Diale her R116000 investment that was fraudulently withdrawn from her account in January. Diale was refunded after Consumer Line intervened.
A first-time car buyer, Ayanda Vumazonke, who cancelled her contract to purchase within the 10-day cooling off period, was refunded her R80000, also thanks to intervention by Consumer Line. The director of Velocity Cars in Canal Walk in Athlone, Cape Town, wanted to charge Vumazonke a cancellation fee of R6000 and additional fees of R3000 for a broken windscreen and radio even though they had not been fitted.
Another Consumer Line success yielded a R1-million handover to a road accident victim. Jabulile Mathebula was awarded R1464385 in June last year after a four-year legal battle. Her second hurdle was to get the money from her attorney, who had invested it without notifying her parents or passing it on to the curator of Mathebula's fund.
In another success, FNB refunded Jacky Nkohla his R3000 after initially refusing to do so, claiming it was a phishing scam.
To consumers, stick to your budgets, read your contracts before signing, and those fortunate enough to receive a bonus this December, you should consider putting a portion of your 13th cheque towards paying off your debts before indulging in festive season spending.
From Consumer Line we wish you a warm and joy-filled Christmas and Happy New Year. This Consumer service will re-open on January 11 2012.
Source: Mail & Guardian
The motor industry has been problematic this year. Consumers complained that they were sold defective cars, and service providers refused to exchange the cars for new ones after failing to repair them as required by the Act. Mercedes-Benz disappointed a customer when it refused to service a car that had clocked 120000km.
The car had only exceeded the serviceable kilometres by 671km and the customer knew that he was allowed a leeway of 1500km to benefit from the motor plan. He almost parted with R21385, but after Consumer Line's intervention, the luxury car dealership reconsidered its decision and serviced the vehicle at no cost. In an extreme case, an official at the Rosebank dealership was accused of assaulting a client, Jolin Majmin, who complained about poor service after paying R17000. Majmin also claimed that his car was damaged after the dealership drove it for more than 70km while it was in their care. Mercedes-Benz SA is still investigating the complaint.
Thanks to Absa for refunding pensioner Nikki Diale her R116000 investment that was fraudulently withdrawn from her account in January. Diale was refunded after Consumer Line intervened.
A first-time car buyer, Ayanda Vumazonke, who cancelled her contract to purchase within the 10-day cooling off period, was refunded her R80000, also thanks to intervention by Consumer Line. The director of Velocity Cars in Canal Walk in Athlone, Cape Town, wanted to charge Vumazonke a cancellation fee of R6000 and additional fees of R3000 for a broken windscreen and radio even though they had not been fitted.
Another Consumer Line success yielded a R1-million handover to a road accident victim. Jabulile Mathebula was awarded R1464385 in June last year after a four-year legal battle. Her second hurdle was to get the money from her attorney, who had invested it without notifying her parents or passing it on to the curator of Mathebula's fund.
In another success, FNB refunded Jacky Nkohla his R3000 after initially refusing to do so, claiming it was a phishing scam.
To consumers, stick to your budgets, read your contracts before signing, and those fortunate enough to receive a bonus this December, you should consider putting a portion of your 13th cheque towards paying off your debts before indulging in festive season spending.
From Consumer Line we wish you a warm and joy-filled Christmas and Happy New Year. This Consumer service will re-open on January 11 2012.
Source: Mail & Guardian
Friday, December 2, 2011
Nationalism, not nationalisation
If I were a betting person, which I'm not, I would say that the centrepiece of the ANC's approach to managing the mineral resources of the country will be a resource rent tax (RRT). A research committee investigating the role of the state in the management of the country's mineral resources has completed its study but, according to ANC secretary general Gwede Mantashe, the report has been sent back to the authors to ensure that it is written in accessible language.
The research is in response to calls for the nationalisation of the mines by ANC Youth League revolutionary-turned-cattle-farmer Julius Malema. The committee has studied best practice in 13 countries. Its report has yet to be made public but the outlines of its content have begun to emerge.
At the least, it will seek a more activist role for the state in the management of the country's $2.5-trillion of unmined resources. This continues to be cast as nationalisation but, more accurately, can be thought of as nationalism: the question is how the state can ensure that the country extracts the maximum benefit from its resource base.
Two of the heaviest hitters in the commodities market, Ivan Glasenberg of Glencore and Tom Albanese of Rio Tinto, with combined annual global revenues of $240-billion last year, have in recent months singled out resource nationalism as a key potential risk to their businesses.
My understanding is that a key finding by the ANC's research team is that state intervention in the minerals sector internationally is the norm rather than the exception. This will no doubt challenge conventional market-based theory that holds that the state should limit its role to providing infrastructure and good governance such as in the issuing of mining licences.
You have to note that the ANC-run government has not covered itself in glory on this point. It reformed the old system in which "big mining" grabbed as many of these rights as possible and then, in some cases, sat on them as though they were a God-given right. But the new system has suffered from a lack of transparency and has, apparently, such as is the case in the Kumba/ArcelorMittal deal, been used to take a nice chunk of the Sishen iron-ore mine and transfer it to the first family and its cronies.
The RRT is best known as a controversial tax that former Australian prime minister Kevin Rudd wanted to introduce. It led to his undoing, but his successor, Julia Gillard, has recently passed the tax into law, albeit at a much lower tax rate than that envisaged by Rudd. The Australians intend using the RRT's proceeds, about R88-billion over four years, to build new infrastructure and cut taxes on higher value-added, job-creating secondary industries.
The idea is that this will help to combat the continuing deindustralisation of the Australian economy and help prepare the economy for the days when natural resources have been depleted. The fact that BHP Billiton earlier this year posted a record profit of $24-billion on revenue of $71-billion and taxes of $7-billion no doubt helped the passage of the bill. The RRT is an additional tax imposed on profit over and above all other taxes. As such, it is a kind of a windfall tax. These are much better known. The United Kingdom, for instance, has had such a tax on the North Sea gasfields. Many oil-producing countries have similar taxes, the authorities sometimes taking the lion's share of profit in taxes. Ghana this week announced a windfall tax on minerals, saying it was part of a move to equalise taxes on mining and oil companies. The tax, which Bloomberg reported is supported by the International Monetary Fund, will be set at 10% of profit after company tax, which has recently been raised from 25% to 35%.
"Ghana, Africa's second-biggest gold producer, will set up a publicly traded company to manage the country's revenue from the precious metal, including profit from a planned windfall tax and higher corporate tariffs," Bloomberg reported. "The Ghana Gold company will be majority owned by the West African nation's government and will list shares on the Ghana Stock Exchange," Newman Kusi, an adviser to Finance Minister Kwabena Duffuor, told Bloomberg.
It is understood that the International Monetary Fund is supportive of resource taxes if they are well designed and do not operate as a disincentive to investment. It supported Australian initiatives to implement its resource tax and is likely to take an interest in moves by South Africa to introduce such a tax here. A high-profile supporter of resource taxes is Nobel laureate Joseph Stiglitz, who last year said Australian miners had been too influential in shaping the debate about resource taxes.'"The natural resources belong to the people,'' he said. "You need to have a well-designed competitive auction to have different companies compete so that companies get the necessary returns to do the investment, but the surplus goes to the Australian people," Stiglitz said, as reported by The Age.
Documents published on the ANC's website, including that by Paul Jordaan, a researcher on the panel investigating economic options for the state, have suggested that resource taxes can realise most if not all of the outcomes listed by pro-nationalisation pundits, including increased revenue for the fiscus and greater equity from the proceeds of scarce resources, without exposing the economy to the great risks nationalisation would bring. Also apparently mooted in the yet-to-be-released ANC's economic policy documents are export taxes on some minerals, which could be used to incentivise the local beneficiation of minerals. The idea would be to attract industries to source their inputs domestically at the lower local price.
Word is that the ANC's research indicates that as much as R40-billion could be realised annually from a RRT, that is about 40% of the current R104-billion budget deficit. There is debate about whether local miners would be able to pass on higher taxes to end users, but some of our smartest economists see this in simple terms: we give away our minerals too cheaply, exchanging a declining resource for oil and other imports that we use to fuel our lifestyles. In an ideal world, we would earn more for our resources, at least while the commodity boom fuelled by the rapid growth of China and India continues, perhaps even sufficient to run a trade surplus rather than a deficit. In this scenario, we could move from being a debtor nation to a creditor one, with cheaper money as there would be less need to keep rates high to attract foreign money.
The counter argument, though, is that, should the state get its intervention wrong and mess up key prices, it could put the economy at significant risk. The fact that our parastatals have been poor performers adds weight to this argument. If you cannot run utilities in transport, energy and tele-communications, are you really up for interventionist strategies to raise mineral prices?
Another argument against resource taxes is that the state can get used to the windfalls and will not spend these revenues wisely and sustainably. The counter argument to this, as noted by the Australians, is that the benefits should accrue not to the fiscus but to a stabilisation fund, which then smooths out the dividend flow to the state.
It is understood that the ANC proposals favour establishing a sovereign fund from some of the proceeds, the idea being that these funds are invested offshore to help keep the currency competitive. One of the economic risks is that the state has been unwilling to bring in the private sector to help develop infrastructure. We are yet to hear how the proceeds of possible windfall taxes will be used but, if it means a bigger state with more money to spend rather than lower taxes on jobcreating businesses, we could end up back at square one.
Source: Mail & Guardian
The research is in response to calls for the nationalisation of the mines by ANC Youth League revolutionary-turned-cattle-farmer Julius Malema. The committee has studied best practice in 13 countries. Its report has yet to be made public but the outlines of its content have begun to emerge.
At the least, it will seek a more activist role for the state in the management of the country's $2.5-trillion of unmined resources. This continues to be cast as nationalisation but, more accurately, can be thought of as nationalism: the question is how the state can ensure that the country extracts the maximum benefit from its resource base.
Two of the heaviest hitters in the commodities market, Ivan Glasenberg of Glencore and Tom Albanese of Rio Tinto, with combined annual global revenues of $240-billion last year, have in recent months singled out resource nationalism as a key potential risk to their businesses.
My understanding is that a key finding by the ANC's research team is that state intervention in the minerals sector internationally is the norm rather than the exception. This will no doubt challenge conventional market-based theory that holds that the state should limit its role to providing infrastructure and good governance such as in the issuing of mining licences.
You have to note that the ANC-run government has not covered itself in glory on this point. It reformed the old system in which "big mining" grabbed as many of these rights as possible and then, in some cases, sat on them as though they were a God-given right. But the new system has suffered from a lack of transparency and has, apparently, such as is the case in the Kumba/ArcelorMittal deal, been used to take a nice chunk of the Sishen iron-ore mine and transfer it to the first family and its cronies.
The RRT is best known as a controversial tax that former Australian prime minister Kevin Rudd wanted to introduce. It led to his undoing, but his successor, Julia Gillard, has recently passed the tax into law, albeit at a much lower tax rate than that envisaged by Rudd. The Australians intend using the RRT's proceeds, about R88-billion over four years, to build new infrastructure and cut taxes on higher value-added, job-creating secondary industries.
The idea is that this will help to combat the continuing deindustralisation of the Australian economy and help prepare the economy for the days when natural resources have been depleted. The fact that BHP Billiton earlier this year posted a record profit of $24-billion on revenue of $71-billion and taxes of $7-billion no doubt helped the passage of the bill. The RRT is an additional tax imposed on profit over and above all other taxes. As such, it is a kind of a windfall tax. These are much better known. The United Kingdom, for instance, has had such a tax on the North Sea gasfields. Many oil-producing countries have similar taxes, the authorities sometimes taking the lion's share of profit in taxes. Ghana this week announced a windfall tax on minerals, saying it was part of a move to equalise taxes on mining and oil companies. The tax, which Bloomberg reported is supported by the International Monetary Fund, will be set at 10% of profit after company tax, which has recently been raised from 25% to 35%.
"Ghana, Africa's second-biggest gold producer, will set up a publicly traded company to manage the country's revenue from the precious metal, including profit from a planned windfall tax and higher corporate tariffs," Bloomberg reported. "The Ghana Gold company will be majority owned by the West African nation's government and will list shares on the Ghana Stock Exchange," Newman Kusi, an adviser to Finance Minister Kwabena Duffuor, told Bloomberg.
It is understood that the International Monetary Fund is supportive of resource taxes if they are well designed and do not operate as a disincentive to investment. It supported Australian initiatives to implement its resource tax and is likely to take an interest in moves by South Africa to introduce such a tax here. A high-profile supporter of resource taxes is Nobel laureate Joseph Stiglitz, who last year said Australian miners had been too influential in shaping the debate about resource taxes.'"The natural resources belong to the people,'' he said. "You need to have a well-designed competitive auction to have different companies compete so that companies get the necessary returns to do the investment, but the surplus goes to the Australian people," Stiglitz said, as reported by The Age.
Documents published on the ANC's website, including that by Paul Jordaan, a researcher on the panel investigating economic options for the state, have suggested that resource taxes can realise most if not all of the outcomes listed by pro-nationalisation pundits, including increased revenue for the fiscus and greater equity from the proceeds of scarce resources, without exposing the economy to the great risks nationalisation would bring. Also apparently mooted in the yet-to-be-released ANC's economic policy documents are export taxes on some minerals, which could be used to incentivise the local beneficiation of minerals. The idea would be to attract industries to source their inputs domestically at the lower local price.
Word is that the ANC's research indicates that as much as R40-billion could be realised annually from a RRT, that is about 40% of the current R104-billion budget deficit. There is debate about whether local miners would be able to pass on higher taxes to end users, but some of our smartest economists see this in simple terms: we give away our minerals too cheaply, exchanging a declining resource for oil and other imports that we use to fuel our lifestyles. In an ideal world, we would earn more for our resources, at least while the commodity boom fuelled by the rapid growth of China and India continues, perhaps even sufficient to run a trade surplus rather than a deficit. In this scenario, we could move from being a debtor nation to a creditor one, with cheaper money as there would be less need to keep rates high to attract foreign money.
The counter argument, though, is that, should the state get its intervention wrong and mess up key prices, it could put the economy at significant risk. The fact that our parastatals have been poor performers adds weight to this argument. If you cannot run utilities in transport, energy and tele-communications, are you really up for interventionist strategies to raise mineral prices?
Another argument against resource taxes is that the state can get used to the windfalls and will not spend these revenues wisely and sustainably. The counter argument to this, as noted by the Australians, is that the benefits should accrue not to the fiscus but to a stabilisation fund, which then smooths out the dividend flow to the state.
It is understood that the ANC proposals favour establishing a sovereign fund from some of the proceeds, the idea being that these funds are invested offshore to help keep the currency competitive. One of the economic risks is that the state has been unwilling to bring in the private sector to help develop infrastructure. We are yet to hear how the proceeds of possible windfall taxes will be used but, if it means a bigger state with more money to spend rather than lower taxes on jobcreating businesses, we could end up back at square one.
Source: Mail & Guardian
ANC's resource nationalism
The ANC will push for a new interventionist economic nationalism, rather than a simplistic nationalisation of the country's $2.5-trillion in resources not yet mined, which was what ANC Youth League leader Julius Malema had wanted.
The Mail & Guardian has learned from various sources that central to this plan is to force competitive input prices through taxes and other penalties and for state institutions to take bigger stakes in companies that hold key strategic infrastructure minerals. Every producer or miner of critical feeder stocks that are used in manufacturing -- from steel, fertiliser, coal, platinum, polymers and copper to cement will be targeted for these types of intervention.
The radical proposals are contained in three discussion reports that the researchers handed to ANC secretary general Gwede Mantashe and the head of the ANC economic transformation committee, Enoch Godongwana, two weeks ago. The documents are still to be debated and vetted by the ANC national executive committee before the party can showcase it at its policy conference in June next year.
The first discussion document deals with economic policy and globalisation; the second discusses how state-owned enterprises and development finance institutions can partner with savings industry funds for new infrastructure; and the third investigates nationalisation as an option for ways the state can intervene to benefit from mineral wealth.
Although resource nationalism is seen by some economists as a killer of investment, the ANC's research team that looked at the option indicates that state intervention in the minerals sector internationally is the norm rather than the exception. The team visited 13 countries around the globe as part of their research. Its idea is to use South Africa's resources sector to spur the creation of a thriving manufacturing industry that can drive growth and create jobs.
An option mooted is for state institutions and unions collectively to increase their shareholding in companies such as petrochemicals giant Sasol and steel conglomerate ArcelorMittal South Africa. The view is that these companies, which were once state entities, have strategic input assets that are used in manufacturing, but they are now engaging in predatory pricing and monopolistic activity that stifles competition and growth. "It's more about the alternatives to nationalisation and greater state intervention," Godongwana told the M&G this week. "The state needs to get a better share of these very high prices being charged."
The Public Investment Corporation, which has R1-trillion in assets, and the Industrial Development Corporation together own 26% of Sasol. The proposal is that union investment funds should be used to increase this stake to 51%. As controlling shareholders the state-cum-union would then be able to fix Sasol's prices at rates more beneficial to the economy.
To nationalise, on the other hand, would be highly expensive. Sasol, for example, could cost the state more than R50-billion and ArcelorMittal about R8-billion.
Some of the other options on the table in terms of state interventions on mineral assets are:
* An exports tax on raw minerals as an incentive for companies to beneficiate in South Africa and grow the country's manufacturing capacity. It is a more protectionist approach, one which many other countries have followed, especially in these uncertain economic conditions. But the export tax is exactly the same as the royalties tax, which is based on revenues. The suggestion then is for the royalties tax to be either adjusted or scrapped.
* A resources rent tax, similar to the Australian model, which is based on profits.
* All strategic minerals will have pricing conditions. There is a recommendation to amend the Minerals and Petroleum Resources Development Act to give the minister power to attach conditions to existing and new licences that will force companies such as Sasol to charge a lower export parity-related price than downstream producers would pay in China, for example. These price conditions would have to be imposed by Sasol on their buyers to which they on-sell.
* Strengthen the Competition Act further to allow for stiffer penalties.
* Increase competition in sectors by bringing in an Asian competitor, for example, that will be partly funded by state institutions, such as the Industrial Development Corporation, to challenge monopolies. The same price conditions, however, will apply to the new player.
* Use electricity, rail and port tariffs to force monopolies to lower prices. One recommendation is that Eskom introduce a surcharge on electricity tariffs for Sasol, for example, as a way of disciplining the petrochemicals giant in terms of its higher prices.
* Instead of nationalising Kumba Iron Ore, a proposal is to introduce a user-pay concession on the rail link from its main Sishen mine in the Northern Cape to allow it to export more iron ore. Kumba could build and operate the line for about 15 years and then transfer it to Transnet.
* In the copper industry there are reserves for only another eight years. The state, through the Industrial Development Corporation, is already bidding to buy Rio Tinto's Phalaborwa Mining Company -- South Africa's only refined-copper producer -- which it could merge with state-owned Foskor.
Many of the proposals tie in with the government's broader goals to stimulate the country's industrial base as a way to meet the national growth path's target of five million jobs by 2020. But last weekend Mantashe sent the report on state interventions back to the drawing board, saying it needed to be rewritten in simpler language and case studies of other countries included.
Said Godongwana: "The report must capture the experiences of the 13 countries that were visited and reflect what is good and bad so that we can decide which lessons are useful for our own conditions. We need the best possible recommendations on how we can restructure the economy [to] make us more competitive."
But a number of ANC insiders led the M&G to believe that the report was sent back because it was too strongly against nationalisation and should eventually go down the "nationalisation-lite" route.
Peter Attard Montalto from research firm Nomura International said such interventions created only more investor uncertainty. "It has long been our view that the ANC would take a line of greater state control rather than nationalisation, but in the very long run it will lead us to the same place with the same cost as nationalisation."
Source: Mail & Guardian
The Mail & Guardian has learned from various sources that central to this plan is to force competitive input prices through taxes and other penalties and for state institutions to take bigger stakes in companies that hold key strategic infrastructure minerals. Every producer or miner of critical feeder stocks that are used in manufacturing -- from steel, fertiliser, coal, platinum, polymers and copper to cement will be targeted for these types of intervention.
The radical proposals are contained in three discussion reports that the researchers handed to ANC secretary general Gwede Mantashe and the head of the ANC economic transformation committee, Enoch Godongwana, two weeks ago. The documents are still to be debated and vetted by the ANC national executive committee before the party can showcase it at its policy conference in June next year.
The first discussion document deals with economic policy and globalisation; the second discusses how state-owned enterprises and development finance institutions can partner with savings industry funds for new infrastructure; and the third investigates nationalisation as an option for ways the state can intervene to benefit from mineral wealth.
Although resource nationalism is seen by some economists as a killer of investment, the ANC's research team that looked at the option indicates that state intervention in the minerals sector internationally is the norm rather than the exception. The team visited 13 countries around the globe as part of their research. Its idea is to use South Africa's resources sector to spur the creation of a thriving manufacturing industry that can drive growth and create jobs.
An option mooted is for state institutions and unions collectively to increase their shareholding in companies such as petrochemicals giant Sasol and steel conglomerate ArcelorMittal South Africa. The view is that these companies, which were once state entities, have strategic input assets that are used in manufacturing, but they are now engaging in predatory pricing and monopolistic activity that stifles competition and growth. "It's more about the alternatives to nationalisation and greater state intervention," Godongwana told the M&G this week. "The state needs to get a better share of these very high prices being charged."
The Public Investment Corporation, which has R1-trillion in assets, and the Industrial Development Corporation together own 26% of Sasol. The proposal is that union investment funds should be used to increase this stake to 51%. As controlling shareholders the state-cum-union would then be able to fix Sasol's prices at rates more beneficial to the economy.
To nationalise, on the other hand, would be highly expensive. Sasol, for example, could cost the state more than R50-billion and ArcelorMittal about R8-billion.
Some of the other options on the table in terms of state interventions on mineral assets are:
* An exports tax on raw minerals as an incentive for companies to beneficiate in South Africa and grow the country's manufacturing capacity. It is a more protectionist approach, one which many other countries have followed, especially in these uncertain economic conditions. But the export tax is exactly the same as the royalties tax, which is based on revenues. The suggestion then is for the royalties tax to be either adjusted or scrapped.
* A resources rent tax, similar to the Australian model, which is based on profits.
* All strategic minerals will have pricing conditions. There is a recommendation to amend the Minerals and Petroleum Resources Development Act to give the minister power to attach conditions to existing and new licences that will force companies such as Sasol to charge a lower export parity-related price than downstream producers would pay in China, for example. These price conditions would have to be imposed by Sasol on their buyers to which they on-sell.
* Strengthen the Competition Act further to allow for stiffer penalties.
* Increase competition in sectors by bringing in an Asian competitor, for example, that will be partly funded by state institutions, such as the Industrial Development Corporation, to challenge monopolies. The same price conditions, however, will apply to the new player.
* Use electricity, rail and port tariffs to force monopolies to lower prices. One recommendation is that Eskom introduce a surcharge on electricity tariffs for Sasol, for example, as a way of disciplining the petrochemicals giant in terms of its higher prices.
* Instead of nationalising Kumba Iron Ore, a proposal is to introduce a user-pay concession on the rail link from its main Sishen mine in the Northern Cape to allow it to export more iron ore. Kumba could build and operate the line for about 15 years and then transfer it to Transnet.
* In the copper industry there are reserves for only another eight years. The state, through the Industrial Development Corporation, is already bidding to buy Rio Tinto's Phalaborwa Mining Company -- South Africa's only refined-copper producer -- which it could merge with state-owned Foskor.
Many of the proposals tie in with the government's broader goals to stimulate the country's industrial base as a way to meet the national growth path's target of five million jobs by 2020. But last weekend Mantashe sent the report on state interventions back to the drawing board, saying it needed to be rewritten in simpler language and case studies of other countries included.
Said Godongwana: "The report must capture the experiences of the 13 countries that were visited and reflect what is good and bad so that we can decide which lessons are useful for our own conditions. We need the best possible recommendations on how we can restructure the economy [to] make us more competitive."
But a number of ANC insiders led the M&G to believe that the report was sent back because it was too strongly against nationalisation and should eventually go down the "nationalisation-lite" route.
Peter Attard Montalto from research firm Nomura International said such interventions created only more investor uncertainty. "It has long been our view that the ANC would take a line of greater state control rather than nationalisation, but in the very long run it will lead us to the same place with the same cost as nationalisation."
Source: Mail & Guardian
Thursday, December 1, 2011
SCA: Simelane's appointment as NPA boss 'invalid'
The Supreme Court of Appeal has ruled that Menzi Simelane's appointment by President Jacob Zuma as the director of public prosecutions at the National Prosecuting Authority (NPA), was invalid. The case was brought to the appeals court by the Democratic Alliance, after its bid to have Zuma's decision to appoint Simelane as the NPA boss set aside failed in the North Gauteng High Court in Pretoria last year.
On Thursday morning, Judge Mahomed Navsa ruled that Simelane's appointment was "inconsistent with the Constitution and invalid". The judgment set aside the findings of the North Gauteng High Court, and ordered the president, Justice Minister Jeff Radebe and Simelane to pay the DA's costs. In its application, the DA argued that Zuma "acted outside of his powers by appointing a person who is not fit and proper to hold the office of national director of public prosecutions".
Justice ministry spokesperson Tlali Tlali said the ruling would be challenged in the Constitutional Court. "Naturally, we are disappointed but respect the court's judgment in this matter," said Tlali on Thursday. "We will study the judgment in order to understand its implications as it unfolds further. The court's order must be referred to the Constitutional Court for confirmation as provided for in terms of section 172(2) of the Constitution. A final determination has yet to be made as to what our legal attitude to this matter at the Constitutional Court will be."
The DA's Dene Smuts told the Mail and Guardian on Thursday: "We are very delighted by the judgment. We had major problems with his appointment. We did not think he was fit and proper for the position. We felt it was cadre deployment and are now looking forward to the president putting someone in the position who is fit and proper for the job." The foundation of the DA's case against Simelane was the "misleading and untruthful evidence" he gave during the 2008 Ginwala Inquiry, when he was the director general in the department of justice and constitutional development.
The inquiry looked at the fitness for office of Simelane's predecessor, Vusi Pikoli. Ginwala severely criticised Simelane in her final report, calling him arrogant and condescending towards Pikoli. Ginwala labelled his evidence before the inquiry "contradictory and without basis in fact or in law" and blamed him for suppressing the disclosure of information. This specifically referred to a legal opinion advising Simelane that he did not have authority over the NPA, as he had claimed.
Simelane's conduct was "irregular" and Ginwala even suggested he might have contravened the NPA Act by drafting a letter to Pikoli that instructed him to abort the imminent arrest of former police boss Jackie Selebi.
Although a formal inquiry was set up to inquire into Simelane's conduct before Ginwala in February 2009, Justice Minister Jeff Radebe declined to take disciplinary proceedings against him. Instead he was appointed as deputy national director of prosecutions. The DA argued that Zuma made Simelane's appointment based solely on his CV, without taking into account his questionable behaviour during the enquiry.
Navsa found that Zuma was remiss in not taking the time to consider all the facts about Simelane, saying in his judgment: "I accept that the president must have a multitude of daily duties and is a very busy man. However when he is dealing with an office as important as that of the national director of public prosecutions, which is integral to the rule of law and to our success as a democracy, then time should be taken to get it right." He went on to say: "On the available evidence the president could in any event not have reached a conclusion favourable to Mr Simelane, as there were too many unresolved questions concerning his integrity and experience."
The judgment was careful to prove precedent for judicial scrutiny of the president's appointment of a public prosecutor. In recent months, Zuma and other members of the executive have made several statements taking issue with an "unelected" judiciary passing judgment on executive decisions. During a farewell to former chief justice Sandile Ngcobo earlier this year, Zuma said: "We must not get a sense that there are those who wish to co-govern the country through the courts, when they have not won the popular vote during elections." He added that the powers conferred on the courts could not be regarded as superior to the powers resulting from a mandate given by the people in a popular vote.
Source: Mail & Guardian
On Thursday morning, Judge Mahomed Navsa ruled that Simelane's appointment was "inconsistent with the Constitution and invalid". The judgment set aside the findings of the North Gauteng High Court, and ordered the president, Justice Minister Jeff Radebe and Simelane to pay the DA's costs. In its application, the DA argued that Zuma "acted outside of his powers by appointing a person who is not fit and proper to hold the office of national director of public prosecutions".
Justice ministry spokesperson Tlali Tlali said the ruling would be challenged in the Constitutional Court. "Naturally, we are disappointed but respect the court's judgment in this matter," said Tlali on Thursday. "We will study the judgment in order to understand its implications as it unfolds further. The court's order must be referred to the Constitutional Court for confirmation as provided for in terms of section 172(2) of the Constitution. A final determination has yet to be made as to what our legal attitude to this matter at the Constitutional Court will be."
The DA's Dene Smuts told the Mail and Guardian on Thursday: "We are very delighted by the judgment. We had major problems with his appointment. We did not think he was fit and proper for the position. We felt it was cadre deployment and are now looking forward to the president putting someone in the position who is fit and proper for the job." The foundation of the DA's case against Simelane was the "misleading and untruthful evidence" he gave during the 2008 Ginwala Inquiry, when he was the director general in the department of justice and constitutional development.
The inquiry looked at the fitness for office of Simelane's predecessor, Vusi Pikoli. Ginwala severely criticised Simelane in her final report, calling him arrogant and condescending towards Pikoli. Ginwala labelled his evidence before the inquiry "contradictory and without basis in fact or in law" and blamed him for suppressing the disclosure of information. This specifically referred to a legal opinion advising Simelane that he did not have authority over the NPA, as he had claimed.
Simelane's conduct was "irregular" and Ginwala even suggested he might have contravened the NPA Act by drafting a letter to Pikoli that instructed him to abort the imminent arrest of former police boss Jackie Selebi.
Although a formal inquiry was set up to inquire into Simelane's conduct before Ginwala in February 2009, Justice Minister Jeff Radebe declined to take disciplinary proceedings against him. Instead he was appointed as deputy national director of prosecutions. The DA argued that Zuma made Simelane's appointment based solely on his CV, without taking into account his questionable behaviour during the enquiry.
Navsa found that Zuma was remiss in not taking the time to consider all the facts about Simelane, saying in his judgment: "I accept that the president must have a multitude of daily duties and is a very busy man. However when he is dealing with an office as important as that of the national director of public prosecutions, which is integral to the rule of law and to our success as a democracy, then time should be taken to get it right." He went on to say: "On the available evidence the president could in any event not have reached a conclusion favourable to Mr Simelane, as there were too many unresolved questions concerning his integrity and experience."
The judgment was careful to prove precedent for judicial scrutiny of the president's appointment of a public prosecutor. In recent months, Zuma and other members of the executive have made several statements taking issue with an "unelected" judiciary passing judgment on executive decisions. During a farewell to former chief justice Sandile Ngcobo earlier this year, Zuma said: "We must not get a sense that there are those who wish to co-govern the country through the courts, when they have not won the popular vote during elections." He added that the powers conferred on the courts could not be regarded as superior to the powers resulting from a mandate given by the people in a popular vote.
Source: Mail & Guardian
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