South Africa’s Durban Grievance Airing

South Africa’s post-Kyoto climate change gathering in Durban reflected a mood of recrimination both between and within developed and developing country blocs, mirroring splits in the host among competing political and economic interest groups that have saddled the stock exchange with a double digit loss. According to the UN, it ranks among the dozen worst emitters of greenhouse gases with heavy coal use, with 2010’s Integrated Resources Plan charting a path of one-quarter renewable energy operation over the next two decades. Wind, solar and hydropower, where neighboring facilities in the region could be tapped are core new sources envisioned alongside existing nuclear and oil-conversion technologies. An overriding imperative is to reduce funding and transmission burdens for state-owned monopoly Eskom, whose quasi-sovereign borrowing appetite has contributed to ratings caution and motivated the government to turn instead to multilateral lenders for softer terms. As with the Durban final compromise which aims to produce an undefined legally-binding environmental accord short of outright treaty by 2015, power company reform will be phased in as a gradual process limiting private ownership and participation. Sour local feelings were further fostered by paltry 1.5 percent Q3 GDP growth with mining output down, as 6 percent inflation breached the central bank’s target band due largely to rand depreciation as the worst-performing emerging market currency during the European crisis period. The budget deficit will exceed 5 percent of GDP, and has prompted Pretoria to tighten controls on provinces with runaway spending. With the fiscal squeeze, officials invited underwriting bids for an inaugural external Islamic bond as they seek to meet next year’s $30 billion public sector financing envelope. Gulf, Malaysian and Nigerian investors would be drawn to the structure, advocates believe, but the treasury will still tap domestic banks and institutional investors for the bulk of the sum as well as non-residents continuing net fixed-income inflows. The allocation serves to offset the 3 percent of GDP current account gap as yields outpace advanced economy instruments, despite the central bank holding benchmark rates and regular talk of productive asset nationalization and capital controls to spur business and job creation and exchange rate confidence.

The Zuma Administration has resisted calls in this direction by ANC proponents, with Planning Minister Manual describing mine appropriation as a “bad idea,” but such steps remain “options” and will be debated again at the party’s policy conference in six months. In adjacent Zimbabwe where stocks are up marginally on the MSCI frontier index with commodity capacity off historic lows, “indigenization” involving 51 percent ownership transfer has proceeded partially under threat of license revocation as President Mugabe campaigns on the slogan going into 2012 elections notwithstanding its dubious luster.