While I was snoozing

A day behind the news

Talk about the wrong weekend to be struggling with upgrading wordpress. Turns out, we have all that is bad about governments around Africa, the worst bits of South America’s corrupt politicians and distinct flavours of mob-era Russia rotting from the head. I missed this story until this evening.

The Sunday Times shows that the arms deal was corrupt
And another, shorter article from the Sunday Times says so too

This is actually a good news story.

Should we just move on?

Alec Hogg from Moneyweb also wrote a piece outlining his views. For a while I was worried that he was saying let’s just do another Truth and Reconciliation Commission. You know, as long as we say we did bad it’s ok. Unconditional love and all that.

Turns out that even Mr Hogg now believes it is too late for fessing up. Reminds me a little of the late and still respected Hansie Cronje confessing and apologising for his mistakes, after he had vigorously denied the allegations. It’s amazing how being caught makes one sorry.

Of course, Mbeki still denies everything

The Sunday Times suggests a full investigation into the arms deal is required. Haven’t we had one of those already? How did that work out again?

So is it a pity party?

I don’t want this to be one of those dreary depressed South Africa complaints about how Everything Is Awful. Nobody seriously believed our government wasn’t corrupt. Too many stories, too much of the time. For crying out loud, our police commissioner wasn’t even the fish-smelling rotting head – that title is reserved for Thabo Mbeki (I will no longer be calling him “president” – he has treated the title with such disrespect after all). Uncovering evidence of what we already knew isn’t a reason to mope.

No, the real tragedy? The real tragedy is that our fundamentally flawed democracy will have another layer of paint brushed over the ever-widening cracks opening up in the foundations. Those who’s money was wasted on unnecessary arms, and lined the ANC’s coffers, who have been treated like ignorant peasants by the ANC, will vote them in to power again with a fierce majority in 2009.

What does this all mean for your organisation?

The ANC has been leaning towards popularism for several years now. Like or hate Jacob Zuma, a complaint that has few defenders is that he sways to the popular view. Albeit this view is usually provided to him by his political backers.

On the other hand, I would be surprised if major corruption at the senior level is viewed as more risky in the past. I’m not saying for an instant those with corrupt tendencies won’t want to cheat and steal just as much as before. We’ve just shifted the average risk aversion by showing the risks to be real.

So we end up with less displicined spending, less prudent monetary policy, no relaxing of exchange controls, no relaxing of labour laws, but marginally more honesty. Not sure whether honest and open foolish, destructive policies are better than relatively smart but self-serving and corrupt policies. I suspect that if business knows what the rules are, they will find a way to manage their operations for success.

The risks to the success of South Africa haven’t gone up in the last few days. They’ve gone down. The reality of corruption always existed, we just know a little more about it.  This might discourage corruption in future.

So this story was good news after all.

Published by David Kirk

The opinions expressed on this site are those of the author and other commenters and are not necessarily those of his employer or any other organisation. David Kirk runs Milliman’s actuarial consulting practice in Africa. He is an actuary and is the creator of New Business Margin on Revenue. He specialises in risk and capital management, regulatory change and insurance strategy . He also has extensive experience in embedded value reporting, insurance-related IFRS and share option valuation.

Leave a comment

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.