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Blackwater USA – Daily Brief 7/27/19

U.S.

  • The Senate Intelligence Committee issued a heavily-redacted report saying that Russia targeted all 50 states’ election commissions during the 2016 cycle. It’s only the first of five volumes the Committee is producing on Russian interference.
  • The Senate confirmed Gen. Mark Milley as the next chairman of the Joint Chiefs of Staff by 89-1.

Saudi

  • The Senate Foreign Relations Committee passed yet another bill to block certain arms sales to Saudi Arabia, and prohibit U.S. tanker planes from refueling Saudi aircraft in flight. Pres. Trump just vetoed three similar resolutions, so he’s likely to reject this one, too.
  • The Senate will vote to override his previous vetoes before it recesses (I don’t think they have enough votes to override the veto).
  • Saudi Arabia said it would ban all Congolese citizens from getting hajj visas this year, over fears that some of them may carry the Ebola virus to Mecca. Hajj is August 9-14.

DRC

  • Pres. Tshisekedi’s CACH and former president Kabila’s FCC say they finally came to an agreement to split cabinet posts between them—after six months of negotiations.
  • Their split seems to slant power to Kabila’s FCC. The FCC will control all the lucrative ministries—defense, finance, justice, and “public portfolio” (which includes Gecamines)—and the CACH will control the boring ones—interior, foreign affairs, budget, and economy.

South Africa

  • Hackers targeted Johannesburg’s electricity supplier with ransomware that encrypted its services and left up to 250,000 people without power.
  • The Conversation printed an excellent history of South Africa’s state-owned companies like Eskom, based on an out-of-print book. The briefer article is pasted below.

Mexico

  • An Israeli mob boss and his associate were assassinated in a classy shopping mall in Mexico City. Local reporters said the shooters were working for the Jalisco cartel.

Venezuela

  • The U.S. renewed Chevron’s license to continue operating in Venezuela for three more months, after much internal deliberation. Some senior U.S. officials were pushing to let the license lapse, but others feared that would only give Pres. Maduro an excuse to expropriate the company’s assets.
  • Maduro loyalists on Venezuela’s Supreme Court annulled the opposition-controlled legislature’s decision to rejoin the Inter-American Treaty of Reciprocal Assistance (TIAR). The legislature had hoped to get closer to regional supporters by reengaging TIAR, which is probably why the Court shut the idea down.

Azerbaijan

  • Azerbaijan’s navy rescued all nine crew members on an Iranian cargo ship that flooded and sank in the Caspian Sea.

Pakistan & Afghanistan

  • The State Department approved a $125 million support package for a fleet of F-16 planes, as part of the “reset” Pres. Trump promised after his meeting with PM Khan.
  • Warlord-turned-presidential candidate Gulbuddin Hekmatyar led a 10,000-person rally in Kabul to complain about Pres. Trump and vie for attention with some pretty bombastic statements: “We ask Mr. Trump that if you have the courage and strength, and you believe in your military power, then test it against [Russian President Vladimir] Putin, and not the oppressed Afghans.”
  • A Taliban car bomb in Ghazni targeted the Ab Band district governor, and killed four ANSF.

RSS

  • The Commissioner-General of South Sudan’s Revenue Authority complained that his entity was being bullied into granting enormous tax exemptions for companies, and said total exemptions now amount to double what the state collects.
  • Health officials in South Sudan are trying to spread the word that a rumored case of Ebola that caused a lot of panic was actually just a false alarm: “there is no confirmed Ebola case in the country.”

Other News

  • Two Iranian-backed militias in Bahrain are threatening to stage attacks if Bahrain follows through on executing two citizens accused of terrorism.

South Africa’s state owned companies: a complex history that’s seldom told (The Conversation)

The problems of South Africa’s state owned enterprises are in the headlines every day. Yet many have existed for over 80 years.

Why were they established in the first place and how have they survived this long? Their histories provide clues for their successes and failures.

State owned enterprises in South Africa date back to the 19th century when Paul Kruger’s Zuid Afrikaansche Republiek tried to promote local industries to stave off British control. Kruger’s government erected high tariffs against imports of many consumer goods as well as industrial goods used by the mining industry. At the same time it handed out monopoly concessions for local manufacture. In most cases, foreign capital still managed to control these enterprises – the most important for railway service and electricity generation for the mines.

Kruger’s aim of fostering economic independence through local industries was utterly defeated with the British victory in the South African War in 1902. But the connection between economy and state lived on through the railway and electricity concessions. By the 1920s, the expanding railway enterprise – the South African Railways and Harbours, now Transnet – needed more and cheaper electricity, and steel for rails. In 1923, the Smuts government established the Electricity Supply Commission (now Eskom) in part to serve the railways and also the growing mining industry.

In 1928, Prime Minister Barry Hertzog established the Iron and Steel Corporation (ISCOR) to produce cheap steel rails for the South African Railways and Harbour and to create some independence from the profit-seeking European steel makers.

Although both Eskom and Iscor were established under state auspices, they enjoyed only tepid government support and faced stiff competition. They were established at a time when nearly all industrial goods and many consumer goods were imported at great cost. In the case of electricity, the major market – the Rand gold mines – was already under contract to the private Victoria Fall Power Company . And in the case of steel, a European cartel of steel makers was ready to dump cheap steel on the South African market in order to kill off local production. Some foreign firms established small operations inside the country, but with profits still flowing back to overseas investors.

How did they survive?

Initially, both state corporations survived through close partnerships with their private competitors. In the case of Eskom, the power supplier agreed to provide electricity to the private Victoria Fall Power Company at cost while the the company passed it on to their mining customers at a hefty profit.

Iscor reached similar agreements with local engineering firms, providing them with raw steel to be fashioned into finished products. In addition, Iscor reached a compromise agreement with European steel producers in 1936. This essentially divided the local market, with Iscor providing approximately one-third of steel goods.

Even more contentious were the corporations’ labour policies. In the 1920s and 1930s, the white South African government pursued a policy of favouring white people in industrial jobs as a means of alleviating poverty in largely Afrikaans-speaking rural communities. State entities were under the most pressure to hire whites, many unskilled, into their operations. But, facing heavy competition, Iscor could not raise its costs and employed almost as many black people as white people on its factory floor in Pretoria. In fact, most white employees were foreign skilled workers. And the associated coal and iron ore mines (both Iscor and Eskom used vast amounts of coal) had predominantly black workers.

Both of the first state corporations were dependent on close business relations with private firms, often to their own detriment, and reliance on low labour costs to survive. But they could hardly profit or flourish under such conditions. During the Second World War, they were able to establish more successful operations under near monopoly conditions.

Building monopolies

During World War Two, South Africa’s position changed from an importer to an exporter of many industrial and consumer goods. Its normal trading partners –England and Germany – were obviously preoccupied with supporting their own wartime needs. In fact England called on South Africa to provide goods from bullets to blankets to help the Allied effort. The intensified local manufacture of so many goods placed pressure on Eskom and Iscor, but also provided great opportunities for expansion.

In Eskom’s case, the greediness of the private Victoria Fall Power Company throughout the war persuaded private capitalists that a partnership with the state would be beneficial. Electricity demand from the mines and also the wartime factories on the Witwatersrand (Rand) skyrocketed during the war. The cost of electricity to the mines rose by 10%. By the end of the war, Eskom posted a loss for the first time in its history while the Victoria Fall Power Company earned handsome profits.

By 1948, Eskom had succeeded in expropriating the private company with assistance from the largest mining company in the country – Anglo-American Corporation – which provided money for the buy-out. Eskom then linked all power stations in the country into a national grid allowing for cheaper production of electricity and lower prices to its customers.

Similarly, Iscor was able to eliminate competition through partnerships with the Anglo American Corporation. Iscor needed to find local engineering firms that would process its raw steel into war materiel. Many were either foreign or were owned by the Lewis and Marks investment company that also operated a competing steel company, Union Steel.

In 1945, Anglo American – which became Iscor’s partner in all of the major engineering firms – bought out the company. Since Anglo was principally a customer for their goods, it was interested in low prices and not in reaping profits through steel manufacture.

An Apartheid model

The change of government in 1948 led to a brief change in policies toward the state corporations. The Nationalist government, wary of foreign and even local capital and suspicious of the state corporations’ ties to Anglo American, initially refused to provide the funds for further expansion of either Iscor’s or Eskom’s facilities. Partnerships with the local engineering firms were likewise ditched.

But by the early 1950s, realising the advantages to such arrangements, the government relented and the old ties were renewed, leading to massive increases in production by both firms. In addition, the government looked the other way as it became apparent that black workers were being used extensively at both firms – and even as semi-skilled workers at Iscor – yielding a wage bill that was less than a quarter what it was for whites.

Ultimately, the early state corporations could only survive by relying heavily on support from private capital in the form of partnerships and outright financial support, and the extensive use of disenfranchised and thus lower cost labour to insure low charges to its customers.

Yet this structure could not survive the flight of capital and the enfranchisement of the workforce that followed the democratic transition of the 1990s.

Iscor’s former partners fled to more lucrative parts of the world and the steel corporation was sold to private interests; and Eskom faced an expanding demand for residential electricity without the financial and marketing support of the mining houses.

Their survival now depends on adapting to the dramatic changes in South Africa’s post-apartheid economy rather than relying on their old strategies.