BusinessDay 21 Sep 2017

Thursday 21 September 2017
A2 BUSINESS DAY
C002D5556
FT
A shining beacon for African...
NATIONAL NEWS
Merkel moves assuredly towards a fourth term
Everyone knows the result of Sunday’s
election in Germany. No one
is quite so sure of the outcome.
Barring a political earthquake, the poll
will return Angela Merkel to the chancellery
for the fourth term she once resolved
never to seek. Far less certain is the shape
and composition of the governing coalition
she must then assemble.
The campaign has lacked energy or
great surprises. That is how Ms Merkel
planned it. With the economy growing
Continued from page A3
Xhosa lullabies, created by the
Capetonian Nicholas Hlobo
for the 2011 Venice Biennale, is
among the art the museum aims
to preserve for the continent.
The fate of the Benin bronzes is
on the mind of its South African
executive director and chief
curator, Mark Coetzee, 53, “now
that museums around the world
have woken up to African art”. As
important, it is meant as a catalyst
for the continent’s artists and
curators.
“It’s a public museum with a
private collection,” Jochen Zeitz,
54, former chief executive of
Puma, tells me. The German philanthropist
has built his worldclass
collection with Coetzee
since 2008, expressly to show
it publicly “as a contribution”.
Zeitz’s Segera Retreat in Kenya
was their lab until the Victoria &
Alfred Waterfront proposed the
silo as a not-for-profit museum.
“It’s not my museum or the
Waterfront’s - it’s for Africa,” Zeitz
says. “Africans need to come
on board.” After the free opening
weekend, for which 24,000
timed tickets were gone in nine
minutes, entry will be free for
under-18s and at various times
every week for citizens of African
countries.
Mindful of those who may
never have entered an art museum,
the British architect Thomas
Heatherwick has devised a
spectacular lure. The silo, once
a hub for exporting maize, was
abandoned in 2001. Rather than
gutting its vertical storage tubes,
an organic space was carved out
of the pinkish concrete to form a
cathedral-like atrium; the shape
is precisely that of a grain of corn
left in the silo, which Heatherwick’s
team digitally scanned and
enlarged, mapping it on to the
interior to be cut away. Obliquely
severed tubes overhead are held
up by sleeves of fresh concrete,
though pockmarks and rust have
been painstakingly preserved.
Carving concrete with GPS
tracking is “cutting-edge technology”,
says David Green, chief
executive of the V&A Waterfront,
whose shareholders funded the
Silo’s £35m renovation. Their
joint venture with Zeitz underwrites
operating costs. The museum’s
nine floors are leased
free for 99 years. The seed private
collection is on loan for at least
20 years or Zeitz’s lifetime, while
acquisition committees build a
permanent core. But curators
have been given scope to draw
on loans, making this more than
a display of one man’s collection.
strongly, unemployment at 4 per cent
and the federal government producing
burgeoning budget surpluses, the chancellor
is asking the electorate to endorse
the status quo. Opinion surveys show her
conservative CDU/CSU partnership will
secure about 37 per cent of the vote. After
a lacklustre campaign, support for the
Social Democrats led by Martin Schulz is
running at only a little above 20 per cent.
The conduct of the campaign - mostly
courteous and reasoned - has stood
Angela Merkel
It has been a while since
America’s Deep South held
any sway over the country’s
future. Whatever Alabama’s
voters decide next week will
have a strong impact on Donald
Trump’s state of mind.
At stake in Alabama’s Republican
primary election is the loyalty
of the president’s base. Are they
set on humbling America’s establishment
come what may, as Mr
Trump originally promised? Or is
their allegiance to the president
as a person, regardless of what
he does? Next week will test the
theory of President Trump’s base.
Alabama is the laboratory.
It is a gamble Mr Trump did
not have to take. On one side of
the Alabama primary is Luther
Strange, the sitting senator, whom
the Republican establishment
in contrast to histrionics elsewhere,
whether the policymaking-by-tweet of
Donald Trump in the US or the chaos
of Brexit Britain. Having worked so hard
to re-establish itself as a “normal” democracy,
Germany can seem almost
abnormal in its normality. Mr Trump’s
dangerous antics provide a powerful
reason for Germans to vote for the careful
solidity of a leader who has cast herself as
mother of the nation.
It would be a mistake to imagine that
AMERICA - Trump versus Bannon in the Deep South
EDWARD LUCE
convinced Mr Trump to endorse.
On the other is Roy Moore, the insurgent
challenger, who is vowing
to drain the Washington swamp,
as Mr Trump earlier did. Mr Moore
is backed by Steve Bannon, Mr
Trump’s former chief strategist
and architect of his 2016 campaign.
It has been barely a month
since Mr Bannon was ejected from
the White House. He is already
on an opposing side to the president.
Mr Bannon’s team includes
Sarah Palin, the former governor
of Alaska, and Sebastian Gorka,
another hardline former adviser
to Mr Trump, who also was ejected
last month. So far their horse is in
the lead.
Even by Mr Bannon’s standards,
Mr Moore is an incendiary
figure. A judge who has twice
been removed from the bench for
injudicious behaviour, Mr Moore
believes God is punishing America
McKinsey has closed its eyes in South Africa
JOHN GAPPE
It does not take a genius to recognise
that corporate reputations are
easily lost in South Africa under
the dismal presidency of Jacob Zuma.
It should not be beyond the analytical
powers of a global consulting firm
such as KPMG or McKinsey.
Neither firm was as crass as Bell
Pottinger, the PR firm that went
into administration after running
a racially divisive campaign for the
holding company of the Gupta family,
Mr Zuma’s business patrons. But both
have been tarnished by Mr Zuma’s
misgovernance of his country and
its tragic descent into cronyism and
corruption.
KPMG audited many of the Guptas’
companies and eight of its executives
last week resigned as it admitted
its errors of judgment. McKinsey took
a juicy contract with Eskom, a state
utility, that involved working with a
consultancy linked to the family. The
firm still maintains that it behaved
correctly and is walking the tightrope
of self-justification. I am intrigued to
see how long it will take to fall off.
Here is a simple guide to South
African due diligence: avoid the Guptas,
the Zuma family and state-owned
enterprises over which they exert
any influence. Other professional
services firms paid greater attention
to the daily bulletins of “state capture”
by the president’s allies; they
were also better at resisting financial
temptation.
A client gains two things when it
hires a KPMG or a McKinsey: sound
advice that helps it to raise revenues
while maintaining strong controls,
and the imprimatur that comes with
their names. Particularly in economies
where corruption is common,
Germany has been inoculated entirely
against the upheavals elsewhere. If the
polls are correct, the unashamedly xenophobic
Alternative for Germany will
secure around 10 per cent of the vote.
In any event, AfD’s success will mark a
tilt rightward from Ms Merkel’s studied
centrism. It will also be the first time
the radical right has secured seats in the
Bundestag.
The chaos that followed the influx
of about a million migrants when Ms
for its sins. He vows to end the
“reign” of Mitch McConnell, the
Republican Senate leader, if he
wins. It is the kind of bomb throwing
in which Mr Trump specialises.
Polls show Mr Moore with a
double-digit lead over Mr Strange.
The president hopes to reverse
those numbers on Friday when he
will appear in Alabama with the
relatively sedate Mr Strange. His
gamble may well fail. Mr Trump’s
pride is at stake - as is the direction
of his presidency.
Either outcome will be clarifying.
Shortly after Mr Bannon
was fired, Mr Trump sent mixed
signals on whether he would stick
to his original campaign promise.
First he announced that within
six months he would start deporting
“Dreamers” - those who came
to the US illegally as children - unless
Congress said otherwise. The
right applauded.
government officials take bribes, and
regulation is suspect, they can charge
for lending the benefits of integrity.
South Africa is tricky, for the end
of apartheid in the early 1990s offered
a chance for advisers and consultants
not only to make money but to become
part of the legitimate rebuilding of a nation
that needed business expertise. As
the country has degenerated during Mr
Zuma’s tacky leadership, their responsibility
to examine carefully what they
are asked to endorse has increased.
KPMG has conceded that it failed in
that duty, although it took far too long
to recognise this failure. It was auditor
and adviser to Gupta companies for 15
years, until the taint became too great
last year. It audited the accounts of one
Gupta entity that diverted $3.3m of
public money to a family wedding and
wrote a report that helped Mr Zuma’s
circle wrongly to discredit Pravin Gordhan,
former finance minister.
Merkel opened the nation’s borders in
2015 has subsided. The consequences
have not. Ms Merkel wins widespread
praise for welcoming the refugees from
the Syrian civil war. Yet even as they
take pride in the chancellor’s humanitarianism,
most voters are insistent that
immigration on such a scale cannot be
allowed to happen again. Germany too
has its left-behinds - in parts of the former
East Germany the AfD is likely to score
above 20 per cent.
Tech’s cash glut leaves
public markets behind
• Even if this is not a bubble, it is not a
healthy development for finance
A
year or two ago, there were
warnings that the party was
ending in Silicon Valley. “The
crazy money is drying up,” one observer
claimed. This newspaper cited
“ growing caution” among venture
capitalists. The party may have ended,
but it has been followed by a wilder,
if more exclusive, after-party. While
venture investment overall has been
more or less constant over the past
few years, slugs of cash have been
shovelled into established start-ups.
Much of the shovelling has been
done by the Vision Fund, a tech investment
vehicle operated by SoftBank,
the Japanese telecom conglomerate.
It has raised $93bn, some internally
and more from the sovereign wealth
funds of Saudi Arabia and Abu Dhabi
and companies such as Apple and
Foxconn. The fund has wasted no time
putting the money to work. More than
$4bn went into the tech-flavoured
real estate start-up WeWork, at a
delirious valuation. Similar amounts
went into publicly traded chipmaker
Nvidia and Chinese ride-hailing app
Didi Chuxing. The fund is angling for
a large investment in the ride-hailer
Uber, which is already sitting on billions
in cash.
The Vision fund is not alone.
Slack, which makes office messaging
software, has just raised $250m,
valuing the company at more than
$5bn, despite not having spent any
of the cash raised in its previous two
rounds. Internet scrapbook’s Pinterest’s
$150m fundraising set its value
at $12bn. While total US VC funding
fell slightly in the second quarter of
this year, according to CB Insights, the
amount invested in “mega-rounds” of
more than $100m grew by 60 per cent.
Investors lined up to give $600m to
Social Capital, a “blank cheque” company.
It promises to use the money to
buy a tech start-up. Why bother, given
that start-ups can go public themselves?
The idea is that going public
is a hassle, involving compliance, investor
presentations and uncertainty,
often followed by volatile trading. But
Social Capital investors will allegedly
take a longer term view. According to
company filings, skipping tiresome
disclosures and public scrutiny will
make the process more “transparent”,
a claim so bizarre that it defies
comment.
In short, money is being crammed
into established start-ups though a
private funnel, like grain force-fed to
a goose. The question is whether the
resulting pate will be any good.
The high valuations and desperation
to put large amounts to work is
suggestive of a bubble. Private investors
seem to have concluded that we
live in a world of low growth and permanently
low interest rates. If so, there
is some logic to paying high prices
(with borrowed money) for companies
that will outgrow the economy.
But over history, valuations paid, not
interest rates, are the surer guide to
investment returns.