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Thursday, October 25, 2012


What does a 25% probability for a failed state really mean?

2012-10-24 13:15Clem Sunter
Since writing the column two weeks ago raising the probability of South Africa becoming a Failed State to 25%, many people have asked me what it means and what they should do about it.

Should I make sure my passport is up to date? Should I be going on an LSD (look, see, decide) trip to Australia? Should I be approaching a head hunter for job options in Europe? Should I legitimately be sending more money offshore to mitigate the declining rand? 

Should I be stocking food?

Connecting the dots

These are all valid questions which have been posed to me. Chantell Ilbury and I have always said that part of thinking like a fox is to connect the dots. You cannot just play scenarios – that’s daydreaming. You have to consider your options for each scenario and then decide what you are going to do about it depending on the probability and impact of the scenario. You can either do something now or prepare a contingency plan just in case. Either way, the whole point of the process is to improve the speed and quality of your response in chasing the opportunities and countering the threats offered by the scenarios.

So, let’s get back to the significance of a 25% probability. Pictorially, it covers an “L” or 90 degrees of a circular disc. If you spin the disc, there is a 25% probability that the needle will end up on that 90 degree segment. What is more is that if you spin it again whatever the previous result, the probability is still 25%. Like spinning a coin where you get ten heads in a row, the chances are still 50:50 that the next one will be a head. The difference between these examples and real life is that real life only happens once and therefore probabilities are far more subjective.

Recently, I had a discussion with a group from MIT in the US who tried to convince me that you can mathematically link the raising of the flags on our scenarios to their probabilities. I am not so sure because of the one time aspect of life; and so much of what happens is due to the animal spirits or irrational nature of mankind.

The bottom line is that the 25% probability on a Failed State is instinctive and should be treated as such. In other words, there is nothing scientific about it and if you have a different figure in  mind, you are quite entitled to base your actions on your figure not ours. Suffice it to say, in our mind, the Failed State scenario is no longer a wild card possibility lurking in the shadows: it is now a genuine threat, the consequences of which have to be thought through.

Impact of the scenario on you

This brings us to the second aspect that has to be considered which is the impact of the scenario on you as a business, you as a family or you as a person. If I said to you that the plane you had booked a flight on had a 25% probability of crashing, you almost certainly would not take it unless you were in a war zone and wanted to escape. The reason is a high likelihood of death in the event that the scenario materialises. Equally, if I gave you a 25% probability of being eaten by a shark when swimming off a particular beach, it would be very foolhardy of you to go in the water. One of the reasons you would not take the risk in either case is that the alternative options are usually easy to exercise: use another airline and go to another beach or swimming pool.

The impact of a Failed State scenario is far more difficult to imagine since so many varieties of a failed state exist, ranging from oppressive dictatorships through perpetual anarchy to civil war and at the extreme end genocide. No expert in the field here has adequately described the different forms that a failed state in South Africa could take. We certainly can’t, particularly as regards timing and rate of descent. 

The only thing we can state with confidence is that the rest of the world will collectively turn its back on us, apart from a few outcasts who will welcome us to the club of pariah nations.

Two categories of options

Hence, the evaluation of the overall risk of this worst case scenario i.e. probability times impact is a highly personal thing. And so too is the selection of options available which depends on individual circumstances such as age, level of wealth and education, business experience and skills, as well as the number of children and other family commitments you have in South Africa. In the case of a business, the opportunity to expand the geographical footprint outside South Africa will be linked to its range of products and services, health of its balance sheet and potential partners elsewhere.

However, options can be divided broadly into two categories: adapting your own strategies and tactics as regards your own future in light of the changing odds of the scenario; or rolling up your sleeves and taking action – however big or small it may be – to reduce the odds of the scenario itself. In other words, you become an active citizen in ensuring that South Africa does not fail.

Far be it from Chantell and myself to give you specific advice on which option you should take. What our 25% probability means is that you should give the matter some serious thought if you have not done so already. Then decide on appropriate action or have a contingency plan. That is what a fox would do – logically not fearfully, with a sense of purpose not despair.

The death of South Africa 
— By Allister Sparks

Read this and weep... 

Some interesting facts about Welkom, of which most South Africans are possibly not aware .

Strange that the situation does not seem to be reflected in mining reports and the stock market in SA - or is it ? Last Sunday's papers covered the Oppenheimer’s sale of all their family's de Beers shares for $5.2 billion to Anglo American. Nicky Oppenheimer, current chairman, says it was a tough decision.
The death of South Africa’s mines is the death of South Africa...

There are many microcosms of decay that one can use as examples of the decay of the macrocosm of South Africa. In many respects the booming of South Africa’s mining industry and its current decay under the ANC’s Black Economic Empowerment system is a microcosm of the booming of the Republic of South Africa under Apartheid and its decay under the ANC Marxist terrorist regime.

During the first half of the 20th century, gold was discovered on several farms south of the Free State town of Odendaalsrus. After the Second World War, Sir Ernest Oppenheimer and his Anglo American Corporation, the progenitor of Anglo Gold, bought up all the prospecting rights in the area and decided to mine the richest gold find in the history of South Africa.

Prices of property in Odendaalsrus skyrocketed, so Sir Ernest Oppenheimer decided that he would build his own town for his miners, instead of paying the exorbitant prices in Odendaalsrus.

He drove 20km south and climbed a hill called Koppie-alleen (Lone Hill ) and looked down on the plains, where his mines would be and decided to build a town from scratch, called Welkom (Welcome), named after the farm where the gold was first discovered.

The people of Odendaalsrus were upset and took him to court, objecting to the new town. Ernest Oppenheimer’s lawyer was Abram (Bram) Fischer, an Afrikaner Communist and Anti-Apartheid activist who would later defend Nelson Mandela at the Rivonia trial.

Fischer was a Rhodes Scholar at Oxford University and travelled to the Soviet Union in 1932. He was also later awarded the Lenin Peace Prize, (1966) the Soviet equivalent of the Nobel Peace Prize. The prize was normally awarded to prominent Communists who were not Soviet citizens.

Fischer, incidentally, was married to Molly Krige, the niece of liberal Boer General Jan Smuts (later to become Prime Minister of SA). She was also a staunch Communist. Nevertheless, in 1947, the Orange Free State Provincial Council issued Oppenheimer with the birth certificate of the town of Welkom.

In his mind, Oppenheimer envisioned a beautiful garden city with broad streets. He commissioned the design of Welkom to leading town planner William Backhouse and landscape gardener Joane Prim. For Backhouse, the design of a town from scratch, was a dream come true. Space was not a problem on the Free State plains, so he designed the streets broad, with no traffic lights, only roundabouts, to keep the traffic flowing and no high-rise buildings in the new town. In the centre of town, he wanted a 'Roman Forum' with a square, where town folk could gather. It was surrounded by a horseshoe-shaped road of 75 metres wide, known affectionately by the town people as the 'Hoefie' short for the Afrikaans word 'hoefyster' meaning horseshoe.

Sports clubs, golf clubs, Olympic swimming pools, cinemas, theatres, hospitals, parks, schools, a technical college and an airport were built, all with the riches of the gold below the fertile soil. The town attracted people from all over South Africa. Money was flowing, salaries were high. By the 1970s Anglo Gold was operating six massive mines, with 22 deep level shafts, in which 122,000 people worked. The mines of Welkom were producing 35% of the gold in South Africa, which in turn was producing 75% of the world's gold. 
Everyone was buying and driving a new car at least every year. They would say that when the ashtray was full, it was time to buy a new car. The 'hoefie' gave rise to the hot-rod culture of Welkom, where young men would drive around at night showing off their new Ford Cortinas with eagles painted on the engine bonnets and flames on the sides, fur on the dashboard and plastic oranges on the radio antennae! This culture also gave rise to the building of a Grand Prix racing track at Welkom. Times were good for blue-collar whites.

Even in the nearby black township of Thabong and the coloured township of Bronville, the living standards were very high.

But then the ANC took over in 1994, mostly with the help of the Oppenheimers and J.P. Morgan, who founded Anglo American Corporation in 1917. Hardly had the ANC communists taken over, than they wanted not only a slice of the pie from the mining industry, but the whole pie.

Black Economic Empowerment was introduced and mines had to give away half of their assets to black ANC members. For Anglo American Corporation, the writing was on the wall and before they could lose everything, they merged with Minorco in 1999 and moved their assets to London. In the last 10-15 years, more than 100,000 jobs have been lost in Welkom. The skip-wheels of the mines are not turning anymore and the noise of the mines, as well as the hot-rods, have fallen silent. The ziggurat-like walls of the slimes-dams next to the R73 road are the last remnants of a once-thriving mining industry. Today, the mines are in the hands of BEE companies and being plundered for scrap metal. The municipality of Matjabeng (nee Welkom) is run by the ANC. In June 2011 it came into prominence as one of the worst examples of ANC corruption and misrule. How a small town blew R2bn. on dodgy deals...
Most of the whites have left Welkom. Blacks make up 90% of the population and whites 8%. To say that the town is a shadow of its former self, is an understatement. The decay is obvious everywhere and it is fast becoming a ghost town. 1500 staff houses at the mines are standing empty. Even churches in town have closed their doors. The remaining whites in the area, mostly farmers, are struggling under stock theft and brutal farm attacks, tortures and murders .
Elsewhere it is not going any better. The Aurora mine at Grootvlei, which is owned by the Zuma and Mandela families and at one stage employed 5000 workers, now have less than 200. Aurora is now a ghost town. On the 8th of May 2011, in a Carte Blanche TV show, it was revealed that Cosatu (Council of SA Trade Unions) calls the owners of Aurora (Zuma and Mandela family members) -- Super Exploiters!!
If there is an abyss of desperation, these men abandoned at the mineworker hostels are in it. At Grootvlei, near Springs, the water and electricity has been cut, the toilets are a sanitary shock. On good days, they may have hot food. Two hours drive to the west, is the Orkney mine in Klerksdorp. There is an inescapable feeling of sadness here. Cooking pots are empty here too. Ntsani Mohapi has been on the mine since the mid '70s; he should be in line for a pension, but that is all gone now. "There are people who are crying, there are people who are dying, because we deal with people who are lying". 
As things stand hundreds of miners are still in limbo; millions of Rands are outstanding in salaries. Wives have left husbands, children have dropped out of school, people have been blacklisted. They can't even claim Unemployment Insurance Funds.

The allegations against Aurora's directors are damning: since they took over the Pamodzi mines in 2009, which were fully operational at the time, they have been accused of not paying salaries, making endless broken promises, misappropriating UIF and pension fund money and stripping assets of mines they haven't paid for. (Source: Carte Blanche TV programme).

The BBC has extensively reported on how the Zuma (Jacob Zuma's nephew) and Mandela (Nelson Mandela's grandson) families exploit their workers and treat them worse than dogs. While the Zuma and Mandela family members grow rich and fat, they do not pay their starving workers, which effectively makes them slave owners. Is this the 'Freedom' Mandela and Zuma spoke about and fought for? They were not Freedom Fighters... They were not fighting for the Freedom of the people, rather for the enslavement of the people under a communist yoke.

The Grootvlei mine now stands in ruins. What could not be stolen and sold for scrap, is cut up and sold to the Chinese state-owned mining company, Shandong Gold. The  foreman at Aurora can only stand and watch as the looting of the mine continues. This is the same ANC who wants to nationalize the mines, the banks and the farms. Can you even imagine the utter enslavement of blacks, the dilapidation and ruin of South Africa that will follow? 

As the rivers of gold, and other critical minerals, that once flowed from South Africa dry up, one after the other, due to BEE and nationalisation, the world and especially the Oppenheimers will look back to the good old days, when the whites were in charge of South Africa and they were making their fortunes. The day will still come that they will realize that they might have betted on the wrong horse.
Oh Cry the Beloved Country... Siyalila siyalila inkomo yethu ifile....

Ra le bona la moepa moholo monyolosa thaba.....


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