Saturday 23 August 2008

Will the real Tzippi Livni please stand up

Tzippi Livni is positioned to be the next Prime Minister of Israel. The ruling party, Kadima, will hold a primary for its leadership during September. Current PM Olmert has already announced that he will not offer himself as a candidate during the primary. This leaves the way open for Livni to assume leadership of the party and, with it, the position of Prime Minister of the State of Israel. Although Livni will have some opposition, she is currently the firm favourite to win the primary. But who is Tzippi Livni, and what qualifies her to be Prime Minister of Israel?

I guess that this raises the question as to what qualifies anybody to be the Prime Minister. In most cases, they will not have had previous Prime Ministerial experience. If they do come with experience, chances are that they were not exactly successful the first time around. So how does it come to pass that a person who, a year ago would not have been thought of in the context of Prime Minister, is suddenly the leading candidate for the job?

Both Tzippi's parents were prominent members of the Irgun, the pre-state underground movement. She served as a lieutenant in the Israel Defence Forces and worked for the Mossad for a time. She qualified as a lawyer and has 10 years experience in public and commercial law. She has served in the Knesset since 1999 and has held no less than 5 Ministerial posts including her current job as Foreign Minister. So, she seems as well qualified as anybody for the role of Prime Minister. The one thing that seems to set her apart from her competitors in the race is that she has a track record of being honest where others have been involved in one scandal or another. She goes against the trend of Israeli politics where scandals and inappropriate behaviour almost seem to be a pre-condition to be a politician in Israel.

Although Livni has a seemingly envious track record having served in a number of varied and noteworthy positions, there is a question as to how successful she has been in her previous jobs. Besides keeping her nose out of trouble, what significant achievements can she point to? It is difficult to measure the success or failure of a Foreign Minister or a Justice Minister. Did she hit her sales target year after year? Did she strike any remarkable deals for Israel Ltd.? Not to my knowledge. Perhaps the fact that she was not the subject of any scandals or dodgy deals is success in itself in our political world. In my view, this is all she has going for her. Personally, I would prefer a Prime Minister who is known for positive achievements rather than for not having any black marks against her name.

This view of Tzippi is reinforced when I recall some of my personal dealings with her during the mid 1990’s. At that time, she was Director-General of the Government Companies’ Authority. This is a rather grand title for somebody who had the job of acting as the shareholder representative on behalf of the government in companies which the government owned or held a shareholding in. My experiences with her relate to Bezeq, the incumbent telecommunications operator in Israel.

At that time, I worked for London-based telecommunications operator, Cable & Wireless. C&W’s Chairman, Lord Young, was a personal friend of Israeli PM Rabin (of blessed memory) and received a personal approach from Rabin regarding the government’s intended privatisation of Bezeq. C&W’s participation in the privatisation process would have generated much-wanted interest in Bezeq’s privatisation. Lord Young was eager to be a player in the peace process that was unfolding in the wake of the Oslo accords, and envisaged a role for C&W in bringing together telecommunications operators from Israel, Jordan, Lebanon and Syria in addition to being involved in the establishment of an operator for the emerging Palestinian Authority area. Young had the vision of a giant multi-country telecommunications infrastructure across all of the Eastern Mediterranean countries that would be run by a single operator. In addition, Young had a sharp eye for a good deal and he thought that Bezeq would be a great investment for C&W. He did not have to be invited twice by the Prime Minister. Within a very short space of time, C&W acquired a substantial holding in Bezeq via the small float of Bezeq shares that were traded on the Tel Aviv Stock Exchange. C&W initially purchased a 5% stake in Bezeq, which quickly grew to 7% and entitled C&W to appoint a representative to the Bezeq Board of Directors. Thereafter the investment was increased to 10% and was threatening 14%, at which point a further Director was to have been appointed. Despite Rabin’s enthusiasm to involve C&W in the privatisation process, I am not sure that he anticipated that Young would act so quickly and so decisively.

Behind the scenes lurked Tzippi Livni and her partner-in-crime, Limor Livnat in her role as Minister of Communications. The ladies were less than pleased with C&W’s bid for Bezeq. They had other plans for Bezeq’s privatisation. Whilst they were eager to attract the interest of C&W and other large international telecommunications operators, they had hoped to offer their bride, Bezeq, in a beauty contest to the highest bidder. They envisaged C&W, AT&T and other wealthy suitors paying top dollar to ensure that they would be the chosen groom in the face of stiff competition to win the bride’s hand. C&W’s holding of 10% meant that other suitors were discouraged from participation due to C&W’s seemingly preferred position. It also meant that C&W had access to all information that was tabled at the meetings of the Board of Directors via its representative on the Board. The shutters went down and the ladies declared war on C&W, which had acted “unfairly” in their bridal auction.

When Tzippi realised she had been outfoxed, she resorted to political tactics to try to restore the commercial equilibrium. At C&W, we woke up one morning to discover that a law had been passed through the Knesset preventing C&W from taking up a second position on the Board of Directors if it increased its holding to 14%. This was one of a series of political measures that were taken by Limor and Tzippi in order to limit C&W commercially. C&W’s decisive action drew an angry response which far overstepped the commercial limits that C&W was dealing with. Many angry meetings and phone calls were conducted accompanied by the exchange of legal letters. There were also a number of personal incidents involving the ladies and members of C&W's senior management that did not leave a positive impression of the members of the Israeli government. The only benefit to the Israeli economy of this exercise were the substantial legal bills that were run up by both sides. In the middle of this process, Tzippi was replaced at the Government Companies’ Authority and left the unruly mess to her successor to sort out.

As a result of the war that was waged on C&W, the opportunity to attract other possible bidders was completely lost. C&W, which had once been interested in coming to an agreement with the government to buy a controlling stake in Bezeq, lost interest and sold the 20% stake that it ultimately controlled at a substantial profit. The government was left with Bezeq on its books until some 8 years later when the controlling interest was sold to Apax Partners for far less than what C&W had been prepared to pay.

So,what did this ordeal teach me about Tzippi Livni? She is certainly a very determined lady. When you try to take her in a direction that is not where she wishes to go, she will use every trick in the book (and some that are not in the book) to scupper your plans. She appears to be better at using political tactics than commercial expertise. When the commercial going got tough, she resorted to the Knesset to save her plans. Perhaps this demonstrates some level of creative thinking. At the time, it was regarded as dirty play. She is prepared to cut her nose to spite her face. Instead of securing a tidy sum from C&W to contribute to the government’s coffers, she preferred to ensure that C&W went home empty-handed. The fact that the government lost an opportunity in the process did not seem to bother her very much. Most telling of all for me is the fact that her efforts and political tactics did not achieve her ultimate objective to privatise Bezeq.

Whilst a few positive points of her character came to the fore, I consider her efforts in this regard as a failure. She may have won a few battles, but the war was lost. I certainly hope that she will do better when sitting in the Prime Minister's seat.

Saturday 16 August 2008

Ostrich Syndrome

We all suffer from the "Ostrich Syndrome" from time to time. Most of you know what I am referring to. This is the moment that we all experience when it is easier to put your head deep into the sand instead of taking in what is happening around us. It is that moment when we prefer to maintain the status quo rather than be forced to act against things that are happening around us.

One of the most famous and tragic cases of Ostrich Syndrome was the behaviour of the German Jews during the period that led up to the holocaust. It seems that the financial and social advantages that the Jews of Germany were experiencing caused them to ignore the threat and rising strength of the Nazi Party. Those that did manage to overcome the difficulties associated with giving up on a very comfortable lifestyle and separation from their families were those that were ultimately best off. Unfortunately, most of those that behaved like ostriches did not survive the worst case of genocide to befall the human race.

I am reminded of this when I view some of the events taking place in South Africa today. After the tragic and appalling acts of the apartheid government, there were high hopes and expectations when Nelson Mandela and the ANC government were elected to power. These hopes, expectations and potential that were felt then have not materialised in any significant way. It is true that South Africa has experienced an extended period of economic growth, that a new and large Black middle class has arisen, that South Africa will be hosting the 2010 Football World Cup. So there are some good things to show from the past decade.

On the negative side, however, corruption has become endemic in all areas of local and national government and the country's infrastructure is straining under lack of investment and expansion. Most noticeable is the ongoing suffering by the large number of extremely poor people whose standard of living does not appear to have improved at all since the ANC government was elected. This has contributed to the most frightening aspect of society today - the lack of personal security and safety that has become part and parcel of life in South Africa.

Despite the fact that many people live behind barbed wire and electric fences, this does not seem to stem the brutal and indiscriminate attacks that they suffer in their homes. By going out, particularly at night, people take their lives into their hands due to the numerous muggings, car-jackings, rapes and murders that take place on a daily basis. This is surely not how life should be lived? For an outsider looking into South Africa, this is a very frightening way to live one's life.

The South African Whites seem to take this all in their stride as though this is a normal way to exist. This is particularly true of the Jewish community with whom I have most contact. They have taken all the necessary precautions to reinforce their homes and cars, to employ security companies to offer personal protection and know all the right moves when faced with an adverse situation. I get the impression at times that the continued preoccupation with relating one horror story after another about the misfortunes of others gives a common cause to rally around. It almost seems as though people gain a perverse pleasure from demonstrating their ability to survive in such a hostile environment against the odds.

I am the first to admit that there is no such thing as a country with only good things - no Garden of Eden in our world. When giving advice to people as to where would be best for them to settle down, I always suggest that they identify the things that are most important to them in their lives and a find a country that best accommodates these. As part of the package, it will be necessary to tolerate the less positive things that this country inevitably brings with it. In this context, South Africa has both good and bad elements to its package.

On the positive side, it is a country of enormous natural beauty and of huge opportunities. It also offers a lifestyle of great material wealth for the privileged classes, far beyond what equivalent people in other countries can enjoy. This frequently comes with large homes, fast cars, good food and domestic help in the home that is usually only available to royalty and the rich and famous elsewhere in the world. The negative aspects mentioned above, however, weigh heavily against the good things.

I do not underestimate the difficulty of moving from one country to another. The challenge of relocating to an area with a different culture and language is huge. Families with young children and the elderly find it even more difficult. I can personally vouch for this having moved country twice in the past 20 years. Despite this fact, many have demonstrated that, with sufficient will and belief in the reasons for doing so, it is possible to make such a move successful. What is more, it is preferable to make such a move in a planned and deliberate manner rather than being forced to do so during the course of an emergency.

It seems to me that many Jewish South Africans prefer the advantages of material wealth and social status over the the prospect of personal safety. To me, this is a strange choice to make, but everybody is entitled to decide what is best for them in their situation. The problem is that the next generation is being raised in fear of what may happen to them each day. They are also being raised to value material riches over personal safety.

I would like to believe that the decisions that people have made regarding their futures in South Africa have factored in all the alternatives. I hope that they have considered the positive aspects of living in South Africa, and have decided that this option is better than the advantages of living elsewhere.

Unfortunately, I cannot help feeling that Ostrich Syndrome plays a larger role than it should in shaping peoples’ decisions.

Saturday 2 August 2008

The Water Conundrum

Water has always been a major issue for the countries of the Middle East. The State of Israel has had a particular challenge in providing sufficient quantities for the consumption of its residents, businesses, industries and agriculture. Until 2008, the Israeli government has somehow managed to get by in ensuring that sufficient has been available each year, particularly during the dry summer months.

I say until 2008, because this is the year that the taps are predicted to run dry in Israel. How could this happen? How could it come to pass that a country with the technological capability of Israel and some of the best brains in the world can allow a situation where, barring a major miracle, the taps will shortly run dry? The answer lies in many years of mismanagement of the limited water resources at our disposal, and particular mismanagement of the water consumption.

Israel's natural water sources are limited to the Sea of Galilee (the Kinneret) and the underground coastal and mountain aquifers. Israel's current annual demand for water is more than 2 billion cubic metres. 65% to 70% of this demand is supplied by the above-mentioned natural resources. The remaining demand is satisfied by a number of smaller aquifers and underground reservoirs, with less than 10% of the country's current demand satisfied by desalination. This is despite the fact that the world's largest reverse osmosis desalination plant is located in the southern coastal city of Ashkelon. There is a further much smaller plant at Palmachim. A third plant in the city of Hadera is due to begin producing water in 2009 at approximately the same rate as the Ashkelon plant.

The level of water in the Kinneret was measured at the end of June at 212.70 metres below sea level. The Government-set red line, representing the level beyond which water should not be drawn from the Kinneret, is 213 metres below sea level. Water will, however, continue to be drawn from the Kinneret below 213 metres up to the so-called black line at 215 metres below sea level. At this level, it has been determined that irreparable damage to the Kinneret will be caused. It is true that the Kinneret dropped to a level of 214.87 metres below sea level during the summer of 2001, but our water situation is much more serious in 2008. The reason for this is due to the precarious state of the aquifers which are at a much lower level now than in 2001. It has been claimed that some aquifers have already suffered irreparable damage due to over pumping.

Whilst it is clear that much more could, and should, have been done to supplement the supply of water, what can be said about the management of the consumption of water? The scarcity of water is something that all Israelis are aware of, and that children are educated about from a young age. Almost all toilets have a double flush system, gardens are watered using drip irrigation systems and few people take baths in favour of showers. These are all in-grained in the national psyche in the interests of conserving water. Despite this fact, I was surprised to read recently that Israelis use more water per capita than the Germans who have an oversupply of water.

My major issue, however, is the way in which the water disaster of 2008 has been handled by the authorities. It is true that water restrictions are in place which prevent certain wasteful uses of water. How well have these been advertised? And more importantly, how well are they being policed? It seems to me that they are not being policed at all. I recall drought years during my youth in South Africa. I also recall the measures that were taken to conserve the use of water. Every public water tap had a sticker warning the user to conserve water. Each household was given an allocation of how much water they were allowed to consume on a daily and weekly basis. There was not a resident who did not know what their family's daily consumption of water was. No household waste water was allowed to go down the drain. After washing the dishes, bathing or brushing your teeth, the waste water would be carefully conserved to use for flushing toilets or watering the garden. Most homes had rainwater tanks which would collect the rainwater off the roofs during the rainy season, and this water would be used for watering the garden. This was water conservation at its best.

Regrettably, we do not see any of these measures in place in Israel. This is largely due to the lack of political will to significantly beef up and police water conservation measures. But, more than this, there is a financial conflict of interests at play.

Local authorities in Israel make significant income from the sale of water. Whether the water is obtained from the city's own aquifers or bought from the national carrier, there is a good profit to be made from the sale of water to its residents. There is, therefore, clearly no incentive on the part of the local authorities to work to reduce the consumption of water by its citizens. On the contrary, the city's coffers are a good deal better off when there is increased consumption. It is my impression that this financial consideration is the main obstacle in the path of real water conservation actions that could make a measurable difference to Israel's consumption patterns.

Despite the fact that the government now has plans in place to increase the production of desalinated water sevenfold by 2020, I believe that, at the current rate of growth in usage, demand will outstrip even this supply unless the right conservation measures can be put in place.

The solution to the water conundrum requires a solution to the financial conflict of interests first. Lack of political will to resolve this problem will ensure ongoing water problems for the foreseeable future.