This is my sixth year on the DBSA Board, serving as Chair of the Board from Jan to Sept 2019. At the AGM last Friday my position as Deputy Chair for the next three years was confirmed. I will also be the Chairperson of the Infrastructure Delivery and Knowledge Committee (IDKC) of the Board. The DBSA has traditionally played a major role in development finance in general, but infrastructure funding in particular. It came through the state capture years unscathed, with clean audits every year and no reports of wasteful or unwarranted expenditure. It has R90 billion worth of assets, and it lends around R15 billion per annum. In 2018/2019 we disbursed R9 billion, which is low because of adverse economic conditions. At its AGM on Friday 27th we announced a net profit of R3.1 billion (which we re-invest in development projects) and a pipeline of approved projects of R39 billion for the forthcoming year. We employ about 600 staff, and our cost to income ratio is a remarkable 23% (which is way below a commercial bank). My personal agenda has been to promote green investments and the adoption of what we now call our “development position”. With regard to the former, we now have nearly R20 billion invested in renewable energy and we have become a designated agency of the Global Climate Facility that has made available $100 million for green investments, which we have matched. With regard to our newly adopted ‘development position’, DBSA has shifted from being a purely infrastructure investment bank to a proper development bank, i.e. the ‘D’ in DBSA is no longer a small ‘d’. To this end we have established an Angel Investment Fund to make high risk low interest investments in SMMEs, in particular women-owned businesses; as well as a Social Impact Fund for generating social and environmental returns on financial investments. We are also seeding a new generation of local “D-Labs”, i.e. innovative development labs for promoting entrepreneurship and employment in poor rural and urban areas. We are managing the National Infrastructure Fund announced by the President, starting off with a R400 million project preparation facility provided by National Treasury. This is a strategically important initiative because it is a blended finance vehicle whereby private sector funding is attracted into infrastructure investments by public sector investments that take on more risk and require lower rates of return on investment. As Deputy Chair I will have more time to focus on the strategic guidance of these new green and developmental activities via the appropriate board committees (in particular the IDKC), with less time spent on the wider stakeholder management that is the responsibility of the Chairperson.
On Thursday I was invited by the Economics Department at Stellenbosch University to come discuss my controversial article in Daily Maverick on macro-economic policy (see link below).
Needless to say, they did not agree with my critique of ‘expansionary contraction’ (i.e. austerity) and conservative monetary policy. I summed up the consequences of their position as follows: a well-managed retarded collapse, that in the end triggers a massive deficit as the government spends more to stave off a revolution. Come on, when push comes to shove, do you honestly think an ANC Government would choose a low deficit before a revolution? Oh yes, I forgot – maybe it is assumed that the revolution can be headed off my repressing it with force. Is that good for growth? Well, it can be – after all, Pinochet pulled it off. (Maybe that is what was meant by countering the ‘threat of populist demands’. Well, not by intent, but that would be the consequence.) But in today’s world? Really? I doubt it. But then I got sent this article from the FT on South Korea’s expansionary fiscal policy. Worth considering. Never thought I would see the FT punting support for economic heterodoxy.
South Korea’s fiscal boost is a model for others
How should an export-driven economy with a strong attachment to fiscal discipline, an ageing population and a bitter dispute with an island trading partner react when it is under economic pressure? As regional industrial powerhouses, South Korea and Germany both face similar challenges from the tensions in the global trading system: growth has collapsed, inflation is well below target and monetary policy has already done what it can.
Yet there is one important difference. Despite ample space for easing in both countries, only South Korea has broken with orthodoxy and delivered a radically expansionary budget to boost its flagging economy. Germany, which is set to make a big announcement on how to tackle climate change this Friday, might take note of the speed with which South Korean leaders have been able to adapt to new economic realities.
Seoul’s longstanding commitment to fiscal discipline could put even Berlin to shame. The overall budget for South Korea has been in surplus for more than 20 years. Loosening during the financial crisis was not large enough to tip the government into the red. No other major economy has such a lengthy record of
prudence. Though Germany has been consistently in the black since 2014, its deficit exceeded 3 per cent of national income in seven out of the 10 years from 2001 to 2010.
Now both countries face similar problems. German industry specialises in automobiles, South Korea’s in smartphones and semiconductors. Both these sectors face structural shifts as drivers look to electric cars and phone users fail to find newer models such a draw. The two countries are likewise both at the sharp end of the trade war between the US and China, as well as more localised disputes with Japan in the case of South Korea and the turmoil over Brexit for Germany. They may avoid a recession, but both countries are certainly heading for a
slowdown. Low consumer confidence and falling investment have prompted economists to forecast the slowest rate of growth in South Korea for a decade. Germany, meanwhile, is expected to register its most sluggish pace of expansion for six years because of falling export orders and a construction sector that is
stagnating. In response to the deteriorating economic outlook, Germany has begun to flirt with a more expansionary stance but is yet to commit. Last week, finance minister Olaf Scholz said that if an economic crisis breaks out “thanks to our sound finances we will be able to counter it with many, many billions”. Yet the planned 1 per cent increase in spending still appears lacklustre compared with the action taken elsewhere. In Seoul, fiscal conservatism has come to a decisive end. South Korea has planned increases related to job creation, welfare payments and research and development. Spending is being increased by 8 per cent — on top of a supplementary budget passed in August — despite sluggish tax receipts. This South Korea’s fiscal boost is a model for others means government borrowing is expected to reach a record high. An overall deficit next year, which includes the social security fund, would mark a big shift from a 2018 surplus of 2.8 per cent of national income.Fiscal easing will take longer to transmit to the real economy than monetary policy, but that does not make it any less important. The effects on business and consumer confidence may be meaningful as companies look to a new source of orders. Expectations for inflation and economic growth could improve. South Korea is right to act swiftly before the outlook deteriorates further. The global backdrop has changed: Berlin can learn from Seoul’s willingness to change, too.
It is really hard to believe that it was twenty years ago that a small group of us started dreaming and imagining what eventually emerged as the Lynedoch EcoVillage and the Sustainability Institute. It always amuses me when people assume there was some sort of grand vision or plan at the start. Herewith two videos that capture the origins beautifully:
Whew, these past weeks have been a roller-coaster ride of note. They started with co-teaching the Globalization, Governance and Development module with Prof Gael Giraud, from Paris. Gael is an extra-ordinary mix: up until a few weeks ago he was Chief Economist of the French Development Bank, he is a University Professor and CNRS Senior Researcher, and he is also an active Jesuit Priest who lives in a Jesuit community in Paris. He has a PhD in Mathematics and he has just completed another PhD in Theology focused on the commons. Although we have very different intellectual histories, we share so much in common when it comes to economic theory, sustainability, climate change, transition, spirituality and many other issues. We had tremendous fun co-teaching the module, which covered a huge canvas from the global financial crisis, to long-wave theory, governance, the commons, the problems with macro-economic theory, and many other issues. The large class of 45 students gave very positive feedback. The following week I taught the Applied Economics module, which is a weird name for a course that focuses on the political economy of South Africa from colonization to ‘Ramaphoria’ via state capture. After spending the whole of the first day on the evolution of the South African political economy based on the article by Hart and Padayachee, we had four sessions with four extra-ordinary women: on Tuesday morning Dr. Vuyo Mahlati (Chair of the panel on land appointed by Ramaphosa) did a morning on why rural development has been a failure since 1994; on Tuesday afternoon Tash Ismael-Saville, Director of the Youth Employment Service (YES), spoke about youth unemployment, entrepreneurship and the role of YES; on Thursday (morning and afternoon) Dr. Nthabiseng Moleko (lecturer at Stellenbosch Business School, Commissioner on the Commission of Gender Equality, and poet) provided a grand overview of the nature and structure of the South African economy and the challenges we face; and on Friday morning Amanda Gcanga (PhD researcher at CST) shared her research on water governance with a case study of Cape Town. With a small class of 17, we could have rich wide-ranging discussions, including a session I facilitated on toxic masculinity based on Chapter 9 of my new book Age of Sustainability. Student feedback was fantastic, and most rewarding. I must say, I have taught this course for a few years now, but this was the first time I felt it delivered on my own expectations. Then the following Monday and Tuesday, I facilitated a gathering of 20 researchers who are contributing chapters to a new publication called Anatomy of State Capture (not the final title, I hope). Hopefully this will be published later this year. It will bring together detailed case studies of each of the institutions that were fundamentally harmed by the corrupt practices of a wide range of elites in the public and private sectors. The publication will include chapters on state capture during the apartheid era, plus chapters on what happened to key SOEs like ESKOM, DENEL, TRANSNET etc, plus the hollowing out of institutions like SARS, security agencies, NPA, local government, etc. Furthermore, there will be several chapters on how elites subverted major private sector institutions, including Steinhof, KPMG, Bain and Net1/CPS. Such exciting stuff, and we generated new thinking about the nature of state capture and the struggle for democracy. Somehow I made it through the rest of the week, including delivering on Thursday a public lecture at the Sociology Department at Stellenbosch University based on my new book Age of Sustainability – and then that night I left for for the Limpopo Province. The plan was to go with Mamphela Ramphele who is playing a leading role in strategising how to develop around 2000 hectares of land that her community won back via the land reform process. She was so excited to be returning to where she grew up before her community was forcibly removed. Unfortunately, she fell ill and I had to go alone. I met the reps of the Community Property Association in the foothills of the grand Soutpansberg mountains, west of Louis Trichardt. Sad and exciting: sad to see how challenging it is to make land reform work; exciting because there are so many possibilities!! I stayed the night at Lishiba, the stunningly beautiful piece of paradise on top of the Soutpansberg mountain owned by John Rosmarin – I have been there often, and it was a deeply moving experience to return to the place where my family was together during many very happy moments.
I am excited this year to be co-teaching the upcoming Globalization and Development module (that is part of Masters Programme) with Prof Gaël Giraud, former Chief Economist of Agence Française de Développement (French Development Bank); Professor at Ecole Nationale des Ponts et Chaussées (ENPC)/LISIS; Senior researcher at CNRS; Professor of Energy and Prosperity; and member of the Steering Committee of Campus de la Transition. Besides holding a Phd in Mathematics and practicing as an economist, he is also an ordained Jesuit Priest and lives in a Jesuit community in Paris. He has just completed his Phd in Theology on the potential of a transition to a commons-based economy. He will deliver a Soil, Soul and Society seminar on Thursday 25th July at 17.30 at the Sustainability Institute. The provisional topic is: Towards a New Commons-based Economy: Concepts, Applications and Potential. Gael arrives this week, and we plan to spend the rest of the month together talking and teaching, with a view to fusing together our respective knowledge fields into what hopefully could be a really meaningful journal article that could firmly link together what currently remains very disconnected, namely solutions to the global economic crisis, new theories of governance, sustainability transitions and the new literature on commons-based economies.
I have just come across Raymond Suttner‘s obituary for my former teacher Peter Hudson. I had no idea he had passed away. He taught me during my Honours in Political Studies in 1981! I was the only student who took his course on Marxist theory. We used to meet at his flat which I think was in Hillbrow. It was rigorous and intense. That was the start of my journey in search of a non-reductionist social theory, which eventually led me into systems thinking and then into critical complexity theory (influenced by Paul Cilliers here at Stellenbosch). Paul and Peter are so similar in many different ways. I am saddened by this loss. Peter wove a thread into South Africa’s rich intellectual life that was significant in may different ways, but the most important was the value of theoretical rigor informed my an ethical commitment to critical thinking. Thanks Raymond for this beautifully written piece. And thanks Peter for the foundations that you laid for my subsequent intellectual journey. What a place the Politics Department was in those years: Peter Hudson, Tom Lodge and Michael Nupen. And a few doors down the corridor, David Webster in the Social Anthropology Department.
From FB post dated 18 May:
Yho, two weeks of extra-ordinary interactions, learnings, debates and explorations – and now parking off in a French Chateau just south of Paris which is the home-base of a new initiative called the Transition Campus – a new Sustainability Institute-cum-Schumacher College type experiment by an amazing group of progressive academics, activists, nuns and Jesuits! But before I say more about that as I gaze out onto the lush green French countryside, let me share the lead up to this. This two week helter-skelter of amazing interactions started Monday before last – 6th May. That was the first day of the Design for Transformation course that was run and facilitated this year by Dr. Keneilwe Munyai. Keneilwe’s speciality is ‘design thinking’ and she ran this week-long module (that is part of our Masters Programme) as a facilitated process of self-learning and co-creation. The class was covered in bright colourful post-its. Each group had to work on how to set up entrepreneurship hubs that really work! The next day I was in Johannesburg talking at a morning workshop on the Just Transition co-hosted by EE Publications (Chris Yelland) and Nedbank. I shared the platform with Zwelenzima Vavi and Mike Levington. Great discussion – I floated our ideas about municipal ownership of renewable energy IPPs. When the panel was asked what is the single biggest obstacle to a just transition, I replied it was the belief that ESKOM could be saved (note: I said belief because that is the problem – the problem is not that it cant be saved, because its death-spiral is in fact unstoppable: the end result of believing it is stoppable is an IMF bailout). And then on Friday 10th the CST hosted an all-day workshop on complexity theory with keynote talks by renowned complexity economics guru Brian Arthur, complexity theorist of organizational and cultural change Jean Bolton, systems biologist Jannie Hofmeyr and myself. I’ll post my talk, but I tried to share my thoughts on Ukama (Sub-Saharan African philosophy of relatedness) and how the recent Western post-humanist turn is about the west catching up with long traditions of African thinking. On Monday 13th I was back at the Sustainability Institute to support Megan Davies start the Renewable Energy Policy module – this was her first-ever module that she has designed and coordinated on her own (and yet another graduate who has morphed into a great teacher, following the likes of Jess Schulschenk, Josephine Musango and Candice Kelly!). With 60 students, including many engineers, it has been a great success! (Well done Megan!). The next day (Tues 14th), I found myself at the 19th African Utility Week conference at CTICC. ESKOM CEO Phakamani Hadebe and Minister of Energy Jeff Radebe were opening speakers. Hadebe was brutally honest, especially when speaking off script. He simply said if you want more coal mines, no-one will fund them! (Anyone in the ANC listening to him?) Hence, he said, the transition to renewables is inevitable and necessary. Radebe sang a different tune – what I would call the ‘diversification blues’, including ‘clean coal’ (that ingenius piece of nonsense invented by the coal lobby!) But at least Radebe reiterated his commitment to embedded generation and a new role for municipalities as deliverers of renewable energy! Exciting stuff. I spoke at the next session which was a panel on climate change – to put it mildly, it was a disastrous session that lacked any coherence, with an American from PowerAfrica ending it with a long boast about the great work Americans are doing for Africans (his financial contribution must have had conditions). On Wed 15th I gave a talk on Megan’s course on the global energy revolution which was similar to my Soul Soil and Society talk earlier this year. And that afternoon I caught a flight to Johannesburg to attend a DBSA Board meeting on Thursday. That afternoon I left for Paris. And here I am at the Transition Campus, invited here by my new friend Prof Gael Giraud (CNRS Professor, Chief Economist of the French Develoment Bank [AFD] and Jesuit Priest!) Gael also arranged for me to meet with his colleagues at AFD in my capacity as Chair of the DBSA Board earlier in the day – AFD is a major partner of the DBSA’s, and recently co-funded the CPI Report on South Africa’s ‘stranded assets’ caused by the global decarbonisation processes. I’m on the Scientific Committee of the Transition Campus – an extra-ordinarily exciting endeavour, and I hope to do some teaching here. With 40 rooms and 9 classrooms on a 12 hectare property with its own indigenous forest, this incredible donation from the Catholic Church to this group opens up many opportunities for us to partner with yet another SI-cum-Schumacher College type initiative that seem to mushrooming around the world in response to the demand for an alternative pedagogy that is appropriate for the present polycrisis. The Chair of the Scientific Committee, a Professor, said they have tried to initiate alternatives within French Universities like what we have at Stellenbosch, and they failed. So they have to make it work outside the Universities. This really stunned me. After all, we were sitting in a meeting room in an institution where Jacque Derrida used to teach – the famous Ecole des Hautes Etudes en Sciences Sociales! Amazing that even there, alternatives are not possible! Tomorrow I head for Freiburg to meet with a team that Maarten Hajer and I are leading to formulate a research proposal on how the global renewable energy revolution could catalyse a just transition (for submission to the VW Foundation). After Freiburg I head back to Utrecht University to spend time with Maarten and his colleagues, and in mid-June I head to Tunis for discussions about research on democratic governance. So grateful to be living my life to the full – challenging, exhilarating, somewhat exhausting and, I hope, impactful. So grateful.
Re-visiting Vauban – the famous eco-Neighborhood in Freiburg! Still looks amazing. Complete with a pic of my hero Varoufakis and a Green Party election poster that proclaims the market has failed!!
This makes me homesick – the amazing SI farming team!! The energy and vibrancy is unmatched anywhere in the worlds through which I travel. Just love our ways.
I’m home after four weeks on the move: Paris, Freiburg, Utrecht, London, Amsterdam, back to Johannesburg for four amazing days and nights, and then to Tunis (via Frankfurt), and then home to Stellenbosch. A beautiful mosaic of connections, creative collaborations, explorations, talks and discussions. I had 5 days in Utrecht at Maarten Hajer’s Urban Futures Studio where I finished off my book Age of Sustainability: Just Transitions in a Complex World. The main task was to complete the conclusion. Fittingly, I wrote the last paragraph on African soil – in Tunis, the ancient land of my Sephardic ancestors. I even found an amazing graphic for the cover page. It’s all submitted now and ready to go into production. It should be out by September! I just can’t believe it. Other highlights of the trip were the Campus de la Transition located South of Paris, meeting someone from the P2P Foundation in Amsterdam, meeting Jeremy Oppenheim from SystemIQ in London, seeing my son Ray in London, and our proposal development teamwork in Freiburg (with researchers from Utrecht University, University of Freiburg, Indian Institute of Housing Studies and Stellenbosch University). I did my first-ever talk about the book at a seminar at Utrecht University. I was too anxious to prepare properly, but once I got going it emerged in a surprisingly clear way. I guess I’ve lived and breathed that book since the start of my time at Yale in March last year. Amazing movements on all fronts. So exciting. Today, back to my two offices at the Sustainability Institute and CST. Both looking as beautiful and inspiring as ever. It’s a privilege to live this life. I take nothing for granted.