Author Archives: The Altitude Consultancy

The lost treasure at the end of the Rainbow Nation

In South Africa on holiday, I am struck by how morose my political friends have become. These are not the typical white South Africans often to be found decrying the state of their homeland in London’s bars, but hard-core, life-long ANC activists who were in the underground movement in the decades before political freedom and who are as committed today as they were 20, 30 or more years ago. I have never known them to be so gloomy.

There is understandable dismay over the sexual appetite of the President, Jacob Zuma, a polygamist with, at the current count, 20 known offspring, legitimate and illegitimate, from his multiple wives, girlfriends and sexual conquests. This is also the man who believed that a shower after unprotected sex was adequate safeguard against HIV and who was embroiled in a very public financial scandal and trial shortly before becoming president. The man is not another Mandela.

But the sorrow – because it is a heartfelt sense of loss, not simply of political disillusionment – that my former ANC colleagues and their friends feel is much deeper than their embarrassed discontent at their President. They mourn the loss of the ANC ideal, which bound together all those activists who fought against Apartheid for freedom and democracy.

That ANC ideal was very evident during Mandela’s five-year term of office, when the Government’s core agenda was to provide the basics for the impoverished masses – water, housing and education. Now, they say, Government is drifting, lacking that central purpose that drove frenetic activity in the ANC’s first term.

Effective policy has given way to administrative bureaucracy, change to continuity and idealism to cynicism. Ministers have been corrupted by high office – at the very least by the trappings of office – and Parliament is weak, with the majority ANC MPs lacking both the capacity to challenge the Executive and the inclination, dependent as they are on party lists for their positions.

What do I think, I am asked. It’s democracy, I reply. You fought for and won the right to elect any Government you chose. And with that freedom came the right to be disappointed in it.

Welcome to my world.

Sleeping with the enemy

The fuss over whether Lord Nicholas Stern has or hasn’t agreed to advise the Conservatives on climate policy set me thinking about when is it ever the right time for senior figures to switch political sides.

When I heard the news on the Today programme earlier this week that Lord Stern would be advising the Tories, my first thought was “so what?” and my second was that it was a sensible decision by all involved, since there needs to be continuity in climate policy. Frankly, I would be more worried if he weren’t advising them.

His swift and strong rebuttal – that he will advise a policy group, but will not be an adviser to any political party – showed that the Tories had gone too far in claiming him as one of their own.

But what of those who have deliberately got into bed with the Tories, and why have they done so? Yesterday saw the launch of George Osborne’s “New Economic Model”, with seven named senior business endorsers. Why have they publicly jumped so far ahead of an election with an uncertain outcome?

Osborne’s “eight benchmarks” are entirely sensible and uncontroversial. Who could object to macroeconomic stability, a safer banking system or a greening of the economy, for instance? Not me, and I’m hardly likely to consider a blue rinse any time this side of eternity. But for leaders of major businesses to be so publicly endorsing the Conservatives, when they are far from assured of forming the next Government, is a pretty high-risk strategy.

The presumption is that by being early movers they will gain credit from a future Conservative Government, either as individuals or for their companies. All well and good if the Tories win. But there are still four months and a Budget to get through before the General Election, during which time an outgoing Government has plenty of opportunity to take revenge for their infidelity.

And what if the Tories don’t win outright, and somehow Labour and the Liberals cobble together a Government? Well, then you’ve rather blown your political capital for five years. While you will have a right still to expect a Labour-led Government to act responsibly towards your company, you can’t expect it to bend over backwards to be extra helpful if you’ve so publicly ditched it ahead of an election. Those meetings with Ministers, which are currently arranged so easily, may take that little bit longer to come around. When you pick up the phone for an informal chat with the Ministers’ advisers, you might find they don’t answer or call back. And the tribal backbench MPs who currently help you to make your case are unlikely to forgive you for dumping their party.

The Financial Times today reports that these business leaders are rowing back and claiming that their endorsement is only of the principles in Osborne’s plan, rather than a political endorsement of the Conservative Party. This is sensible, since they need to continue to do business with Labour in the coming months. Though it would have been better if they had not allowed the Tories to make political capital out of them.

So when should senior business leaders jump ship? Well, ideally they should be like Switzerland – neutral and willing to make a profit from all sides in times of war. But if they are determined to take sides, then they should be like the Italians, switching only when they are absolutely certain that the side they are currently on is definitely going to lose. Until then, they should stick with the Government of the day, as it is the Government which determines the economic, business and fiscal policy that affects their businesses.

Or they should just keep schtumm.

FW de Klerk: my part in his downfall

Next week is the 20th anniversary of Nelson Mandela’s triumphant walk to freedom through the gates of Victor Verster prison, near Cape Town, after 27 years in jail. But today is the anniversary of the astonishing speech in which President FW de Klerk announced Mandela’s imminent release and the unbanning of the African National Congress, the South African Communist Party and the South African Trades Union Congress.

De Klerk had succeeded the internationally-loathed PW Botha (the Big Crocodile) only five months earlier and, as has been written about by far better-placed people than me, took the pragmatic decision deliberately to end Apartheid. For his contribution in dismantling the old South Africa, De Klerk rightly won the Nobel Peace Prize with Mandela in 1993.

De Klerk’s contribution to the new South Africa, though, following the first democratic elections and Mandela’s election as President, is less well-scrutinised. In 1994, he became one of two Deputy Presidents, alongside Thabo Mbeki, in a Government of National Unity (GNU), which also included the Inkatha Freedom Party’s Mangosuthu Buthelezi.

Although the ANC had virtually a two-thirds majority in Parliament, the Interim Constitution provided for a cabinet seat for any party with at least 20 MPs. The aim was for the GNU to govern for all of South Africa and bind black, white and coloured, Afrikaner, Zulu, English, Suthu and Xhosa in working towards a new, non-racial South Africa.

But within three years De Klerk had taken the National Party out of the GNU and the NP became a party of opposition, rather than co-operation. On the one hand, this was a welcome move, since the ANC (like any governing majority party) needed rigorous challenge. But De Klerk then opted out entirely and resigned as leader.

I was, by this time, working as an adviser to the ANC in Parliament, helping with the political restructuring of the Whips Office, with building capacity and experience within the Parliamentary ANC, and with the Parliamentary authorities on reforming some of the rules and procedures of the post-Colonial institution itself.

A very great friend of mine, a white Afrikaner ANC MP, Jannie Momberg, was the Government Whip responsible for programming the business of the day, which he did with enthusiasm and not a little chaos. Jannie was a big character and a big man. He had been a Stellenbosch wine farmer turned NP politician, who then became a Democratic Party MP in the dying years of Apartheid and was one of the first sitting MPs to switch to the ANC once it was unbanned. He was also, among all of this, formerly the manager to the controversial barefoot runner, Zola Budd. An extraordinary and entertaining man.

Once De Klerk’s resignation was announced and a day set for his departure from Parliament, a time was arranged for the customary tributes to be paid. Jannie was determined to speak and asked me to help him to write his speech. Unlike other speakers, Jannie wanted to break with convention and tear De Klerk to pieces. “Are you sure?” I asked him. Oh, indeed he was. So, together, we wrote the most coruscating political speech I have had the joy to script, in which he first praised De Klerk for ending Apartheid and then ripped mercilessly into him for stopping at the border to the new South Africa and refusing to lead his people across. It was a corker!

Jannie went to see the Chief Whip, Max Sisulu (now the Speaker of Parliament) and showed him his speech. “Can I speak, Comrade Max?” he asked. Max Sisulu is not a man easily moved and is inscrutable. He carefully read the speech all the way through, before slowly looking up and staring hard at Jannie. Then, with the merest flicker of a smile in the corner of his mouth, he said: “Jannie, you shall speak directly after De Klerk.”

And so it was that as De Klerk sat down, Jannie took his place at the podium and began to speak, trembling initially, but then building pace and volume and anger; an unstoppable force. The grumble from National Party MPs became a roar, De Klerk went a furious red and still on went Jannie, blinkered, thundering his condemnation of a man who had done so much, but who could have done so much more to reconcile his people, Jannie’s people, to the new South Africa. At last he stopped. The ANC Members cheered and applauded. And I claimed my full stop in the footnote of FW de Klerk’s career.

A tale of two Gordons

The General Election has finally been called, the Government will be thumped in the polls and Gordon will be out of office by May.

No, not in Britain, but in another EU state, where a centre-left Government led by a PM called Gordon is set for a drubbing by the right-of-centre Opposition. This is Hungary, where a youthful and unassuming Gordon Bajnai has led a Socialist/Liberal coalition in a crisis Government since last April, after the embattled former Socialist PM, Ferenc Gyurcsány finally quit.

Bajnai (41) only entered politics four years ago, having spent his adult life in business. He was appointed by his predecessor in 2006 to lead the National Development Agency, responsible for €25 billion of EU funds, then became Minister of Economy and a year later found himself the only candidate capable of holding together the fragile centre-left coalition with its tiny parliamentary majority.

The current opinion polls in Hungary put MSzP (the Socialists) on 17% and the Liberals on a path to electoral oblivion, below the 5% minimum threshold they need to stay in Parliament. Fidesz, the right-of-centre Opposition, are polling in the 60s and the nasty, gypsy-bashing, racist, isolationist Jobbik (an ugly-sister to the knuckle-dragging BNP) could pick up 15% of the vote.

By comparison with his namesake, Gordon Brown is in a much happier position: Labour is polling 30% and with a following wind within striking distance of stuffing David Cameron’s hopes of a workable majority in the next Parliament. Brown will at least lead his party into the elections, even if not for very long thereafter. Bajnai must surely envy Brown.

Well, no. Actually, Gordon Bajnai is pretty happy with his lot. He has done exactly what he promised to do, against wide expectations that his coalition would crumble. He has slashed public spending, in part by cutting public-sector pay and pensions. Interest rates have almost halved, the Forint has strengthened and the budget deficit has been cut to just 3.8% – one of the lowest in the EU. Gordon Brown would kill for such a deficit – the UK’s will be around 12% in 2010.

And despite his austerity programme, Bajnai is consistently more popular in opinion polls than the Socialist Party and is personally likeable and liked. I saw him plunge into a crowd of thousands at a popular fish festival in southern Hungary one evening last summer, only to emerge an hour later relaxed and smiling after having endured nothing more hazardous than goodwill and friendly banter. A couple of weeks later I was with him at a U2 concert in Berlin when he was spotted by a group of compatriots, who buttonholed him only to complain that the bars wouldn’t serve them doubles and to implore him to do something about it.

He is still judged to be an electoral plus for the Socialist Party and is out and about actively promoting his Government’s impressive achievements in its ten frenetic months. He has a strong, consistent message and has delivered it with self-belief and justified pride.

And in any case, he isn’t standing for re-election: he only agreed to become PM for a year, to do for Hungary’s national finances what successive Fidesz and Socialist Governments had been too electorally frightened to tackle. If he’d had the prospect of a winnable election to contest, he would surely never have been able to tackle the economic crisis so fearlessly.

So we may see two Gordons losing office as Prime Minister in April/May 2010. Hungarian Gordon will certainly see his Government lose catastrophically, while British Gordon may just scrape by somehow. But I have a feeling that Hungarian Gordon may be back. Keep an eye out for him in 2015.

Bashing the booze again

Sorry about this. I hadn’t meant to return so quickly to the alcohol debate, but the “news” published today by the British Medical Journal that alcohol advertisers are targeting 15-16 year olds deserves a response.

The nub of the story is that in reviewing alcohol industry marketing documents submitted to the House of Commons Health Select Committee, some health academics, led by Professor Gerard Hastings of Stirling University’s Institute for Social Marketing (the Health Committee’s special adviser) “discovered” that alcohol producers were conducting market research on 15 and 16 year olds. The researchers say that this was used to “guide campaign development and deployment” for alcohol marketing among young people. That is certainly the spin picked up by the media. The Guardian lapped it up: Alcohol industry is ‘targeting young people’, it declared.

But is that what the alcohol industry is really doing? The Portman Group code on Naming, Packaging and Promotion of Alcoholic Drinks seeks to ensure that drinks are marketed in a socially-responsible way and to an adult audience only. Not only is the industry committed not to targeting marketing, advertising, branding or promotions at under-18s, but in advertising it is also committed not to using images of people who are or who appear to be under 25.

The Portman Group has been highly effective in ensuring that the way drinks are named, packaged and promoted is responsible. In 2008 (its most recent report) it randomly sampled 485 alcohol drinks packages and assessed them against the code. Of these, they had reservations against the packaging of 32 products. Producers of most of these drinks immediately volunteered to change their marketing. In just ten cases the producer opted to defend their marketing to the Independent Complaints Panel, and of these just two products were ultimately found in breach of the Code.

So if the industry is so responsible and assiduous in its adherence to the Portman Group Code, why does it conduct market research among 15 and 16 year olds? Well, if you are committed NOT to marketing drinks to the under-18s, it seems only sensible and responsible that you find out what it is that appeals to them so that you can avoid doing it! In order to design advertising and marketing for over-18s, it has to know what would also appeal to under-18s and avoid it. Frankly, I would be more worried if they weren’t doing market research among under-18s.

But this common sense point is lost on the puritanical researchers and the hypocritical media, because it doesn’t serve their purpose of making the alcohol industry the whipping boy for the year. Expect to see a lot more booze bashing as the year unfolds.

Mournville

At first glance, it may seem that Cadbury and BAA have little in common. One is a long-established and much-loved chocolate manufacturer with a philanthropic heritage and the other is an airports company held in low regard by local residents, passengers, journalists and politicians. Bear with me, as they have more in common than you might think.

Both have recently gone through high-profile takeover battles with foreign bidders. BAA conceded to Gruppo Ferrovial in 2006, when the world’s biggest (British) airports company passed into Spanish hands. BAA’s board secured a very good deal for its shareholders and Ferrovial had to stump up a considerable premium to BAA’s regulated asset value, which has caused it headaches ever since.

Similarly, Cadbury’s board has tossed in the towel and conceded to US food giant Kraft. But the Cadbury board has recommended acceptance of a share price of £8.40 – a significant discount to its long-term share price, according to analysts and commentators. This is quite enough to turn a quick buck for the speculative US hedge funds who nipped in recently and mopped up a quarter of its shares. And UK pension funds and long-term investors will make a return, but not as much as they could have done had the company been valued closer to the £10 a share that analysts say it is worth. Its a bit of a steal for Kraft.

So far, so different. But here come the parallels – and the warning to Cadbury and its putative owner.

Both BAA’s new owners and Kraft had to borrow heavily to fund their bids. Ferrovial’s first act as owners was to load that debt onto their new acquisitions. Anyone who has the misfortune to support Manchester United understands that this saddles the company with high interest payments which have to be funded from somewhere, and if it isn’t from higher revenues, then it’s going to be from lower costs or by offloading some of the assets (or, more happily for the rest of us, by upsetting the natural order of things and keeping Man U off the top of the Premiership table).

Even before the UK’s competition authorities declared BAA’s London airports monopoly to be against the public interest and required break-up, economics had already forced BAA’s new owner to sell the recently-acquired Budapest Airport, flog its duty free business and to begin selling off its US interests. Gatwick was also sold in December 2009 in a process begun many months before the Competition Commission bared its teeth and made its sale compulsory. These sales were needed in a large part to finance the repayments of the £12 billion of debt with which Ferrovial has saddled BAA, which until this point had been cash rich and debt light.

Cadbury can expect the same medicine from a Kraft acquisition. Kraft is reportedly borrowing £7 billion to help finance the £11.5 billion deal, and this debt will be loaded onto Cadbury, not onto Kraft. So unless Kraft’s marketing genius can produce astonishing sales figures, there will be rationalisation, cost cutting and asset sales.

And Kraft has more leeway to cut and rationalise than Ferrovial did with BAA. Cadbury’s chocolate can be made anywhere that the recipe and ingredients can be shipped, so its manufacturing can be moved abroad, while BAA’s passengers flying to London can’t be diverted to Central Europe or to the parent company’s home market. Employees at Cadbury are in a much less secure position than BAA’s employees were after takeover, since for the most part, BAA’s jobs were not exportable.

And the impacts go beyond the financial. Before its takeover, BAA was consistently the most admired (privatised) transport company in Britain, having worked assiduously at tackling the environmental and social impacts of its operations. Of course a minority of local residents bore the brunt of the impact of the flying habits of the rest of us, and were naturally unenthusiastic about their concrete neighbour, but BAA was generally regarded as being at the forefront of sustainable development and social engagement, was largely liked by its national stakeholders and envied by its competitors abroad. Not any more. Since Ferrovial took the helm BAA has become the aviation equivalent of Railtrack – derided, disliked and dismissed – though to be fair, this can’t all be laid at the door of the new owners: the security chaos that swiftly followed the takeover was not of their making.

And what does this mean for Cadbury? Loss of independence, of Britishness, will mean a loss of natural empathy and support among decision-makers and customers (I’ve not knowingly bought a Rowntree’s product since it was taken over by Nestle in 1988). The loss of jobs through inevitable rationalisation and cost-cutting means union (and public) hostility and reputational damage. And the sale of, discontinuing or messing around with brands will further damage customer loyalty. All are problems for the new owner.

The global market economy means that takeovers like Cadbury and BAA will continue to happen, and major national companies will lose their independence to aggressive foreign buyers. But caveat emptor – there will be consequences for the buyer as well as the bought. It won’t necessarily be a Picnic and there may be thorns among the Roses.

Hitting the bottle

Alcohol is an issue on which it seems that Labour, Conservative, Liberals and the Scottish Nationalists all agree, to an extent. They have been recently out-machoing each other, proposing evermore draconian regulations. The latest, today, from the Government involve compulsory ID checks for those looking about or under 18 and a ban on irresponsible promotions. The Tories want local authorities to fine pubs, clubs and off-licences which are the source of late-night problems and to put up the tax on “problem drinks”. The Nats want to introduce a minimum price for a unit of alcohol and to ban under-21s from buying alcohol in shops and off-licenses, but still allow them to drink in pubs.

Some of these ideas are fine. Most alcohol retailers are already signed up to a voluntary code on selling and promoting alcohol, and they have either a challenge 21 or challenge 25 ID scheme, which is tougher than the challenge 18 ID scheme that the Government is proposing. They also already ban irresponsible promotions – such as all-you-can-drink for a flat fee, and other promotions encouraging fast or excessive drinking in bars and clubs. What the Government is proposing is to bring the recalcitrant traders into line. Fair enough.

The Tory plans seem to go a step further. But do they? Pubs and clubs which are a source of nuisance can already lose their licences, so why propose fining them when local authorities can close them down? Bars and clubs should be warned, given the chance to turn things round, and if they don’t, then their licences should be taken away. Local authorities already have this power, so wouldn’t it be better to encourage them to use it, rather than just give them yet another power?

And the tax on “problem drinks” is just nonsense. This is one of those policies that looks tough but does nothing. Only about 1% of alcohol sales involves alcopops, and there’s more booze in a large glass of wine or a pint of Stella. Those who load up on booze tend not to do it through alcopos, which are a relatively expensive way to get drunk, but on beer (men) and wine (women).

The Nats’ proposals for a 50p minimum price per unit of alcohol may raise prices at the margins for a handful of drinks bought in supermarkets, but not in pubs and bars, where politicians are focusing their fire. And the revenues from these higher prices will go straight into supermarket tills. Ker-ching! While the notion that a 20-year-old can be married, working (maybe serving in the armed forces), living in his or her own home, voting, paying taxes and yet is not allowed to buy a bottle of wine to have with dinner is plain barmy. Not a vote winner, Mr Salmond.

But in the end, these initiatives aren’t about tackling the very real issue of problem drinking, but about pandering to the chatterati who knock back the sauvignon and merlot and shake their heads over the youth and the oiks who get pissed at the weekend. But it isn’t the youth who are the biggest problem (or victims) of alcohol abuse. Statistically, it’s the middle-aged and post-middle-aged private drinkers, who sit at home drinking on their own. It is long-term drinking that causes health harm, not the odd binge, and these proposed measures do nothing to target this most vulnerable group. That’s because such proposals aren’t designed to tackle the fundamental problems which underly problem drinking, but instead aim to satisfy the desire to find someone to blame (in this case the alcohol industry) and to give it a bit of a kicking.

If legislators want to blame someone, they should consider the following:

  1. The individuals themselves, who (like me and my friends) consciously decide whether and how much to drink. No-one forces us to: we do it because we want to, and sometimes we drink too much. But it is OUR choice.
  2. Parents, aunts and uncles, brothers and sisters and friends, teachers, colleagues and bosses: those we look to for guidance and support
  3. Local authorities and police, who don’t enforce the plethora of laws and regulations already in force to stop the sale of alcohol to minors and to crack down on problem establishments.
  4. And how about decades of Government policy and social and economic inequality that leads to such stark differences in consumption between groups of people and region? Relatively poorer northern regions have more per capita alcohol consumption than affluent southern regions; working class men in manual jobs drink more than middle-class white collar men (though only just, now, since wine has caught on), and single people, especially in middle-age or older, who tend to drink at home alone.

Economics, education, opportunity and even unhappiness are all factors when it comes to drinking. If politicians really want to sort out alcohol problems then they should start with inequality and, literally, look closer to home.