AFRICA INVESTMENT-ANC's love-hate take on business rooted in exile

JOHANNESBURG, March 13 Wed Mar 13, 2013 11:49am EDT

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JOHANNESBURG, March 13 (Reuters) - The love-hate relationship South Africa's ruling African National Congress has with business and capital was formed during its decades in Cold-War era exile.

A new book sheds light on this period, providing fresh insight into current policy debates and behavior that often rattles markets and will continue to perplex investors.

"I think the ANC has never really come to terms with the realities of the world that it found when it came home to South Africa, which of course coincided with the end of the Cold War," said Stephen Ellis, author of the recently published 'External Mission: The ANC in Exile.'

"It was enormously influenced by Soviet and east European socialism. And when it came home to South Africa it discovered that that world in which its cadres had been educated no longer existed," Ellis, a professor in the faculty of social sciences at the Vrije University Amsterdam, told Reuters in a telephone interview.

The ANC generally portrays itself as a broad church with a range of voices. Policies are determined via a rigidly structured process that it claims is rigorous.

It has made no public comment to date on the book.

Banned by the apartheid government in 1960, much of the ANC's leadership fled into exile and its training would take place in Moscow and camps based in pro-Soviet African countries such as Angola.

Various American administrations, notably Ronald Reagan's in the 1980s, gave the apartheid government support as a regional bulwark against communism.

This background goes a long way to explaining much of the ANC rhetoric that investors find jarring: the frequent references to "comrade" and the citing of Marx and Lenin in speeches delivered by cabinet ministers to business gatherings.

Ellis argues the South African Communist Party (SACP) - today an official partner in the ruling alliance - had a far greater influence on the ANC during its exile period from 1960 to 1990 than has previously been thought, and the party has never shaken this outlook.

This tradition can be seen for example in recent debates about the nationalisation of mines and banks and the ANC's on-going focus on an activist and resdistributive state.

As a policy option, nationalisation has been axed for now but it remains popular with much of the ANC's rank and file, which feels increasingly removed from a political leadership seen as out of touch and focused on self-enrichment - a state of affairs that also marked its exile years.

A world view formed in Moscow, Luanda and Lusaka during the Cold War also provides context for the ANC's rows with business and its acute sensitivity.

First National Bank (FNB), the high street arm of financial services group FirstRand, become embroiled in a spat with the party in January over its "You Can Help" campaign, billed as a bid to reinvigorate the push to build a non-racial democracy from the ashes of apartheid.

The advert featured a speech by a 17-year-old girl at a school in the sprawling Johannesburg township of Soweto in which she expressed concerns about crime and corruption.

The party's youth wing accused the bank of treason while its Women's League branded the TV advert - which did not name the ANC - "offensive and politically biased".

Ellis writes that in exile the ANC created an atmosphere that "to say the least, was not conducive to debate. Ordinary cadres who voiced critical or even just unusual opinions were liable to be detained and even killed."

CORRUPTION

One little-known chapter of the ANC's history that Ellis brings to light was the car and mandrax-smuggling rackets run by some of its operatives, mostly out of Zambia.

The government graft that worries investors in South Africa today partly has its roots in this shadowy business.

"'Corruption was rampant,' one cadre recalled. Dealing in cars that were stolen or imported under false pretences were accompanied by other forms of personal self-enrichment," Ellis writes.

It is a culture that has shown remarkable resilience and can be seen in the opulence that much of the ANC's ruling class lives in today, removing it even further from the harsh realities that still mark life in black shantytowns.

It is also true that the ANC has done many things that business - which profited hugely from apartheid - has reaped benefits from.

Trade was liberalised, the end of isolation allowed financial markets to bloom, and the tax authorities have become world-class and fair.

Budget deficits have climbed in recent years but that has been a global trend. But in the ANC's first decade in power they were slashed to the bone and the government was widely lauded for its fiscal discipline.

The central bank is independent and focused on inflation, to the chagrin of the ANC's left.

Meanwhile, major companies such as Anglo American were allowed to take their primary listings to London.

As the gold industry went into decline, the bullion houses were given free reign to cut hundreds of thousands of jobs in a bid to restore profits and keep mines running.

Much of this credit has been given to former President Thabo Mbeki, who embraced markets with an enthusiasm that many of his comrades chaffed at.

On the other hand, much of the country's new elite has made its money though so-called "black empowerment" deals that critics have long countered only serve to enrich a few, politically-connected individuals.

It has all made for a schizophrenic relationship with business that keeps investors uncertain and on their toes.

Ellis said this is because the ANC has "never really felt at home" with capitalism.

"Trying to stay loyal in their own terms to what they see as their ideals, they've ended up with a strange mixture of an extremely aggressive form of capitalism which we hear about in these new millionaires mixed with ideals that come out of an old Soviet view of the world which is completely obsolete," he said. (Editing by Ron Askew)

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