THE ROYAL BAFOKENG: TRIBE, COMMUNITY, AND

UNCLAS SECTION 01 OF 03 PRETORIA 001809 SIPDIS E.O. 12958: N/A TAGS: PREL PGOV PHUM SF EMIN EFIN SOCI SUBJECT: THE ROYAL BAFOKENG: TRIBE, COMMUNITY, AND CORPORATION REF: 08 PRETORIA 1759 -------------- Summary -------------- ¶1. When Kgosi Leruo Molotlegi was crowned king of the Royal Bafokeng Nation (RBN) cloaked in African leopardskin over a Western business suit, his attire reflected his dual role as both tribal chief and modern executive. The RBN he leads is a traditional community, defined by cultural heritage and blood ties, yet is also a $ 4.3 billion investment fund built on platinum revenues. The king envisions the RBN as a world model of "social capitalism," using portfolio profits to underwrite the Bafokeng's socio-economic development. In pursuing this vision the RBN navigates delicate relationships with national and local government authorities. Above all, the king depends on the precarious support of his constituents for long-term developmental strategies beyond the grasp of impoverished members who would more easily understand direct payouts. End Summary. -------------- Traditional Tribe, in the Modern Era -------------- ¶2. On September 1, RBN planning executive Dr. Susan Cook gave a short talk on the Bafokeng's contemporary challenges. (An American citizen, Professor Cook was once a Peace Corps volunteer in Botswana, before pursuing an academic career in linguistic anthropology at Yale, Brown, and U. Pretoria. She joined RBN in 2008.) The RBN comprises about 300,000 members, on communal lands of roughly 400 square miles at Phokeng, North West Province, where the tribe settled circa ¶1550. One of 750 such traditional communities remaining in South Africa today, the RBN is led by a hereditary "kgosi" (chief or king). The kgosi operates within the framework of the national state (with certain protections specified in the 1994 Constitution),and RBN is neither autonomous nor secessionist. The current kgosi, Leruo Molotlegi, is the Nation's 36th king, crowned post-apartheid, 41 years old, a professional architect and a hobby pilot. While public debate on tribal affairs commonly dwells on conflicts between customs and modernity (reftel),Cook presented RBN as an "anomaly" of progressive management (wwww.bafokeng.com) working to bridge such divides. -------------- $4.3 Billion, Land to Platinum to Shares -------------- ¶3. The Bafokeng stand out among peer tribes for their exceptional land and mineral wealth, deftly defended. Beginning in 1868, the kgosi showed the foresight to purchase tribal properties formally, as protection against Boer incursions. Funds for land acquisition were raised by sending male tribe members to work in diamond mines. Platinum was discovered in Bafokeng territory in 1924, and a 1953 court ruling confirmed the RBN's ownership of sub-surface mineral rights. Despite protracted wrangling over those rights with the apartheid regime and with mine operator Impala Platinum, the community has earned a steady stream of platinum royalties since the 1960's. The RBN's string of court victories, most recently in 1999 against Impala, has earned it the nickname "tribe of lawyers." ¶4. Today, according to Cook, 85 percent of RBN income is still from Impala dividends, although diversification from platinum is its goal for future sustainability. In 2006, the RBN converted its Impala royalties to equity as a tax shield, since dividends are not taxed in South Africa. Non-platinum Qsince dividends are not taxed in South Africa. Non-platinum income is from other holdings like oil and gas, a Vodacom stake, and interest on a cash balance of 5 billion rand ($650 million). Investment arm RB Holdings (RBH) manages RBN assets, grown from 8.8 billion rand in 2005 to 44.5 billion before the 2008 market crash, fallen to 22 billion at year-end 2008, and now valued at 33 billion rand ($4.3 billion). -------------- RBN Vision of "Social Capitalism" -------------- ¶5. Dr. Cook's talk focused on the RBN business model, similar to a sovereign wealth fund in being group-owned by all members of the Nation, with earnings channeled back to PRETORIA 00001809 002 OF 003 the socio-economic development of the Bafokeng people. Under the heading of "The Business of Being Bafokeng: the Corporatization of a Tribal Authority in South Africa," she explained how RBH ("the earn") and RBN ("the spend") are partners, each dependent on the other's performance for its own continued operation. On the spend side, the RBN's subsidiaries invest in infrastructure, health, and social services; education, skills development, culture, and arts; sports teams and stadia; and entrepreneurship and job creation. These benefits buy future support for RBH financial management. Kgosi Molotlegi's vision, says Cook, is for the RBN to be a leading exemplar of "social capitalism" using free market mechanisms to benefit the common good. Cook noted that RBN is active in liaison and outreach work with other communities. -------------- Balancing Act with the SAG -------------- ¶6. RBN walks a delicate line with the SAG -- enjoying tax-free status while maximizing its income, and maintaining its own tribal authority structures alongside those of the municipality. The South African Revenue Service (SARS) has long sought to convert RBN to a tax-liable corporate status on grounds that RBH is a profit-seeking enterprise, but the "tribe of lawyers" has prevailed as a nonprofit arguing that it uses those profits to fulfill many social welfare functions of the state, which does not tax itself. Relations with the local Rustenberg government are a "tricky balance," says Cook, of the municipality's political power against the RBN's economic muscle and social sway. Although fully under state authority, the RBN has executive, legislative, and judicial branches of tribal governance structures which exert significant influence over its people. Relations can get competitive, as during the 2009 Confederations Cup when Rustenberg and Royal Bafokeng vied for branding primacy as host city versus host stadium. (Cook: "We won that one.") Privately to poloff, Cook commented that RBN was aiming to install Bafokeng members in municipal councils, to achieve better coordination between tribe and city. -------------- Payouts Now, vs. Investment for Later -------------- ¶7. Realizing the kgosi's future vision for the Bafokeng depends on the precarious endorsement of community members, many who are desperately poor and wanting the RBN to pay its members direct cash benefits. Allocation of community assets is a topic of constant dispute, according to Cook, with many members advocating for a simple sharing-out of RBN incomes rather than investment in long-horizon development. Cook contrasts the RBN approach with that of some Native American tribes in the U.S., who distribute revenues in monthly payouts. The RBN investment attitude is instead one of long-term capacity and infrastructure building, business development, and sustainable income creation to offset the falloff in platinum reserves forecast in 50 years. With average monthly income estimated at only 400-800 rand ($50-100) for families of four, however, and with most investments being at a communal level (e.g. schools, roads, sewers),the case for a developmental rather than distributive approach is perpetually a difficult one to make. -------------- On the People's Behalf (In Spite of Them?) QOn the People's Behalf (In Spite of Them?) -------------- ¶8. Kgosi Molotlegi's leadership dilemma is that of acting for the common good of future generations of his people, even when his plans are beyond the grasp of most of his constituents. For example, his plans specifically address the RBN's carbon footprint, when few members have even heard the term. With no understanding of commodity prices, capital markets, or notions of long-term sustainability, the community has difficulty comprehending fluctuations in the value of its assets. Growth in the RBH portfolio had been seen by the community as a blessing from heaven, yet Cook described how post-crash losses were perceived "as if the kgosi had stashed the money away in a suitcase." The result is an extreme risk aversion. About 100 members conducted a protest march on July 8, advocating that the kgosi withdraw from financial affairs and confine himself to conventional tribal issues. As an American and a female -- an outsider twice over -- Dr. Cook is herself a subject of controversy, PRETORIA 00001809 003 OF 003 in the inevitable debate over who may have a say in the Nation's affairs. Cook says the kgosi's response in that debate is characteristically broad-minded, inclusive of anyone who works for the betterment of the Bafokeng. GIPS