A new kind of minister

2 December 2024 - This week, we ask: What are the implications of Parks Tau’s disagreement with the Competition Tribunal? We look into Johannesburg’s water situation and South Africa’s public procurement systems. We close with a look at Donald Trump’s messaging on international trade.

A new kind of minister

An underrated feature of the Government of National Unity (GNU) is the space that it has created for competition not just between parties, but also between government departments and even within parties. Every day, the ten parties that constitute the current GNU need to identify how and where they can implement their ideas. This creates space for ministers and other officials to set themselves and their departments apart.

In late October, the Competition Tribunal endorsed a ruling by the Competition Commission blocking Vodacom Group’s R13.2 billion proposed deal to buy a stake in Maziv, the fibre business of Remgro. But last week the Department of Trade, Industry and Competition (DTIC), under minister Parks Tau (ANC), filed notice that it would appeal the decision of the commission and the tribunal, both of which fall under its purview.

Mr Tau’s challenging of the tribunal decision bucks the long-standing trend of how the trade and competition department, and various regulatory bodies have functioned up until now — largely in lockstep with each other. Indeed, Mr Tau’s predecessor was well known for vociferously supporting heavy-handed interventions on the part of the country’s competition authorities in allowing or denying company mergers, for example.

Mr Tau’s decision to appeal the tribunal’s decision is a welcome signal in South Africa’s new GNU era, where ministers and others in government departments will feel more comfortable asking questions of government policies that had until recently been sacred cows.

Dry December

Businesses and homes in Johannesburg must prepare for water supply disruptions throughout December and into the new year. With 22 of the city’s 87 reservoirs in critical condition at the time of writing, the entities responsible for providing it with water — including bulk water supplier Rand Water, municipal water supplier Johannesburg Water, and the City of Johannesburg — will implement an “aggressive intervention” to avert a crisis, according to senior water manager Logan Munsamy.

This will include measures such as faster pipe repairs, the acquisition of additional tractor-loader-backhoes, and the disconnection of illegal connections. Johannesburg loses an estimated 24% of water supplied to it by Rand Water to leaks, many of which are left unattended for weeks on end. The level of the Vaal dam, from which Gauteng draws much of its water, declines by 2% weekly, which means that by Christmas this year, it will be at around 20%.

Rand Water will reduce its daily supply to Johannesburg to 1,600 million litres from 1 December, further down to 1,550 million litres from February to April 2025, and to 1,356 million litres by next September. Currently Johannesburg consumes an average of 1,750 million litres per day, against the Rand Water target of 1,528 million litres per day.

Water supply disruptions are leading to service delivery protests. Westbury residents took to the streets last week, blocking roads with burning tyres. Their area is supplied by the Commando system, which has been the cause of outages or low-pressure issues every month without exception in 2024.

Procurement risks

South Africa’s public procurement system is inconsistent, inefficient, lacking in transparency and vulnerable to corruption, according to a study released last week by the Organisation for Economic Co-operation and Development (OECD). The study was conducted before the country’s procurement legislation was updated with the signing into law of the Public Procurement Act in July 2024, which does not address all the shortcomings identified and instead introduces new rules that will lead to greater inefficiencies and opportunities for abuse.

The OECD study found thirty gaps or problems to be addressed in the regulatory frameworks governing public procurement. Furthermore, because the standards for open competitive bidding procedures are not well defined, the risk of inconsistency and bias was significant. National Treasury director-general Duncan Pieterse commented that public procurement in South Africa was “fraught with inefficiencies that make it uneconomical, cumbersome and open to abuse”, and conceded that on its own, the Public Procurement Act would not resolve the various problems in procurement.

In May this year, the Institute of Race Relations (IRR) warned that the Public Procurement Bill represented a failure of accountability and transparency, pointing out that as long ago as the mid-2010s, the National Treasury had estimated that up to 40% of all procurement was corrupt waste. Absent reforms in the public procurement space, new large build projects of the type envisaged by the minister of public works and infrastructure, Dean Macpherson, will be subjected to the same waste and corruption that has come to symbolise public procurement, with a select few politically connected individuals and companies managing to game the system well enough to benefit. Given that large parts of the public infrastructure are failing, any barriers to reversing the decline represent a large risk to economic recovery and commercial opportunity for South African and international investors.

Trump unnerves his trading partners

United States (US) president-elect Donald Trump has threatened Canada, Mexico and China with high tariffs, starting on 20 January 2025, the day he assumes office. In doing so, he continued using unconventional means of diplomacy, using populist language in announcing his intentions on his Truth Social platform. Regarding the 25% tariff he proposes charging for imports from Mexico and Canada, he wrote: “This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!”

Mexico is the largest source of imports for the US, having surpassed China in 2023. It is a major source of cars, car parts, electronics, machinery, alcohol and furniture. Canada is a major supplier of oil, having sold 4.3 million barrels per day to the US in July. China provides the US with large quantities of electronics, machinery, toys, furniture and plastics. Any tariffs imposed on these products will be paid by US businesses and consumers, who will have to contend with rising prices and less disposable income. The Peterson Institute for Economics has estimated that Mr Trump’s proposed tariffs would add over $2,600 per year to the costs of the typical US household.

Representatives of all three targeted countries were quick to respond, expressing their governments’ alarm and pointing out that tariffs imposed unilaterally risk creating tit-for-tat trade wars. This shows Mr Trump’s statements doing their job: they are creating a stir, making his counterparts nervous, and opening up space for the US to redefine its trade and other relationships. This forms part of a signalling strategy and should not be taken at face value, as can be seen by the fact that Mr Trump has bandied about “many different numbers” for tariffs, as CNN put it. Mr Trump’s statements should not be taken as the final word on policy positions, but rather as part of a high-stakes negotiating game.

His most recent criticisms of BRICS efforts to create an alternative currency to the US dollar in international trade should be seen in a similar vein. Mr Trump wrote: “We require a commitment from these [BRICS] Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. Dollar or, they will face 100% Tariffs.” It is exceedingly unlikely that any BRICS country will be subjected to 100% tariffs by the US. But through his outrageous language, Mr Trump has left no doubt about what his priorities are and what outcomes he will pursue — in this instance, maintaining the dominant status of the US dollar.