(Appeared on BDLive on 10 December 2015) The sacking of finance minister Nhlanhla Nene less than a week after the Treasury’s refusal to rubber-stamp the controversial restructuring of a deal between SAA and European aircraft manufacturer Airbus not only sent the Rand plummeting. It shows how little the President regards formerly sacrosanct South African institutions like the Treasury, and how little he understands of the economy. If there is one thing that international investors dislike, it is policy uncertainty. The Treasury has a reputation for being amongst South Africa’s finest institutions. It needs this reputation in order to manage market expectations credibly and to steer the South African economy successfully.
With his decision to oust finance minister Nene, President Zuma put the Treasury’s hard-earned reputation at risk.
Not because the new finance minister David VanRooyen has by no means the same experience that his predecessor had. But because it is apparent that Nene’s removal was driven by petty politics and nothing else.
Under normal circumstances a power struggle between the minister of finance and the chairperson of a government owned parastatal would be a fairly dull affair resulting in a new chairperson for the parastatal. Not so in South Africa. Here, an incompetent but politically well connected chairperson can welcome a new minister of finance into office.
Unfortunately, the haphazard move to replace the minister is no isolated incident, but part of a pattern. It is the pattern of a President who puts himself and a select group of cronies over his people and his country. It is the pattern of a President who builds himself a 247 million Rand home when so many have to live in shacks and who wants to buy a 2 billion Rand VIP jet when the countries’ students take to the streets because government has been starving the universities and students cannot pick the bill up any longer. When President Zuma says “ANC first” what he really means is “My ANC first”.
The Airbus deal SAA chairperson Dudu Myeni proposes would put SAA at an acute risk of default. And, thanks to the generous government guarantees, put taxpayers at an acute risk of having to bail them out. Such a risk might be worth taking and in an open and transparent process taxpayers could form an opinion about whether they really want to shoulder this risk. But the Airbus deal is by no means open and transparent. Much of the details that are known are only known because of the tireless efforts of investigative journalists. The whole deal smells. And smells really bad. It smells as if someone would privately benefit from an agreement that puts taxpayers at risk.
But SAA is not the only thing that stinks up the presidential rose bushes. Of even greater concern is South Africa’s nuclear bid. The President pushes South Africa silently and in secret towards a massive nuclear program with unforeseeable consequences for our environment and our economy. The details about whether or not nuclear is the cheapest options are rather gory, but there are excellent reasons to believe that a country drenched in sunshine but with an outdated power grid will be much better off with decentralized energy from solar power. However, the real worry about the nuclear program is the secrecy it is shrouded in. Where is the public consultation process? Where is the debate within our society whether we really want to produce toxic waste that will pollute the earth for Millennia? Where are the scientific studies that would inform such a debate? Minister Nene reportedly “dragged his feet” with regards to the nuclear program which might well have exacerbated President Zuma’s decision to replace him.
South Africa is in a precarious situation. Political capture of key state institutions including Treasury, the Reserve Bank, and the judical system, are arguably amongst the biggest risks looming on the horizon. The good thing about this situation is that there are remedies. Governments need checks and balances, and the most powerful of these is the risk of losing power, either to the opposition as part of a coalition. Markets would certainly be grateful if South Africans remember this lesson during the next elections.