tag:theconversation.com,2011:/us/topics/nhlanhla-nene-23332/articlesNhlanhla Nene – The Conversation2020-02-26T15:08:09Ztag:theconversation.com,2011:article/1325442020-02-26T15:08:09Z2020-02-26T15:08:09ZBudget shows treasury is desperately short of ideas to fix South Africa’s economic woes<figure><img src="https://images.theconversation.com/files/317358/original/file-20200226-24690-gcs0dp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">South Africa's finance minister, Tito Mboweni, ahead of his budget speech.</span> <span class="attribution"><span class="source">EPA/Nic Bothma</span></span></figcaption></figure><p>At the core of this year’s <a href="http://www.treasury.gov.za/documents/National%20Budget/2020/">budget proposals</a> from South Africa’s national treasury is the admission that national debt is no longer expected to stabilise. In previous years, bar one brief exception, budgets and medium-term budgets repeatedly promised that debt would stabilise even as previous years’ promises were broken. </p>
<p>The reasons are, however, not new. There’s the low economic growth rate, 0.9% for the current year. There are shortfalls in tax collection, R63 billion in the current year. Then there is higher-than-planned spending on state-owned enterprises. As a result, the ratio of national debt to the size of the economy is expected to exceed 70% in 2022/23. Five years ago, former finance minister Nhlanhla Nene promised it would not exceed 50%. </p>
<p>Debt service costs are now approximately 15% of government spending and the fastest-growing spending item. This is up from 10% in 2014/15.</p>
<p>Population growth is estimated to be 1.4% a year, meaning that economic output per person is declining. In that sense, South Africans are getting poorer. The most notable state-owned enterprises are Eskom (the power utility) and South African Airways. Eskom has been allocated an enormous R112 billion over the next three fiscal years. The national airline will get a minimum of R16.4 billion. The spending on both entities is R60 billion higher than previously planned.</p>
<p>Treasury proposes to offset the revenue shortfall and expenditure increase through a R160.2 billion reduction of the public sector wage bill. The cuts are intended to run across national and provincial governments as well as public entities. It is acknowledged in the bowels of the treasury’s documents that the cuts in the wage bill “will inevitably have negative consequences for the economy and social services”. Reducing the wage bill will also hit tax revenue collection.</p>
<p>Unlike previous years, no tax increases are proposed. </p>
<p>Meanwhile, at the policy level, the proposals suggest “structural reforms”. These are needed to increase economic growth, without which only more pain will follow in subsequent years. But these aren’t adequately substantiated in relation to South Africa’s current economic situation.</p>
<p>The country’s public finances and economy have avoided the rapid downward spiral that would have resulted had the state capture faction of the majority party taken power in 2018. Nevertheless, the current budget proposals show that the government is hamstrung by the country’s fiscal and economic situation. And that it’s distressingly short of ideas to get out of it.</p>
<h2>Asking public servants to pay</h2>
<p>Reducing wages is preferable to reducing public service employment at a time when unemployment rates are even higher than their usual extremes. In past years, the treasury reduced public service posts by stealth. It capped provincial expenditure baselines, forcing provinces to cut staff numbers. Employee costs are the largest cost item in providing health and education services. Treasury had proposed to reduce the wage bill through an early retirement programme. This always seemed overly optimistic and potentially counterproductive if it led to the best public servants leaving. It has not yielded the desired spending reductions.</p>
<p>But looking at the new budget proposals together, they amount to the treasury wanting public servants to pay for Eskom bailouts directly from their current and future salaries. The proposal of various trade unions <a href="https://mg.co.za/article/2019-12-13-00-cosatu-suggests-an-eskom-solution/">to use worker pensions</a> to relieve Eskom’s debt burden appears to have been disregarded. In the place of that seemingly sincere initiative, the treasury has opted to play a game of brinkmanship. Its proposal on a wage reduction was formally put to unions only the day before it was tabled. The lateness is evident in the fact that the details of the proposal were not even reflected in the detailed expenditure plans across spheres of government.</p>
<p>Not only does this proposal imply immediate pain for workers and the economy, but it also serves to undermine the role of workers and unions in deciding the restructuring and future trajectory of state-owned enterprises. Given the desire to use Eskom’s crisis and the country’s fiscal situation to push various vested and ideological agendas, this seems unlikely to be coincidental.</p>
<p>Nor do the budget documents explain why it’s equitable to get funds for Eskom bailouts only from public sector workers rather than the private sector or general consumers of electricity. The result may be to sabotage any prospect of a much-needed social compact between government, labour and business on Eskom and public finances. That could also end up undermining the credibility of the budget itself.</p>
<h2>The vacuousness of ‘structural reform’</h2>
<p>What stands out from the budget is how little of substance the treasury and the minister of finance have to put on the table in the way of feasible solutions. </p>
<p>Economic growth is rightly cited as the critical issue. Within that, “adequate electricity supply” is a priority. Yet the treasury continues to rest heavily on rhetoric about private sector participation in the generation of electricity without providing even the most basic information. </p>
<p>In particular, what’s missing is an estimate of the impact of increased private sector energy generation on Eskom’s revenue and finances. Since Eskom is the main expenditure pressure and risk, this is a remarkable omission.</p>
<p>The monster in the room remains Eskom’s debt. It is now a matter verging on a national disgrace that a feasible consensus plan has still not been tabled to address it.</p>
<p>But Eskom is not an isolated case. There are other examples of the failure of the government to act decisively and convincingly when necessary. One of the best examples of state failure on policy and public finances is the Road Accident Fund. Its accumulated liabilities have been accelerating dramatically in recent years. It was obvious that a rapid, decisive intervention was required. Yet that still has not happened. In the interim, the fund’s liabilities have risen from R180 billion in 2016/17 to a projected <a href="http://www.treasury.gov.za/documents/National%20Budget/2020/speech/speech.pdf#page=10">R593 billion</a> in 2022/23.</p>
<p>Other than the failure to table a convincing plan for Eskom, the treasury repeatedly refers to “structural reforms”. This is facile, recycled rhetoric, a smokescreen for recycled economic policy proposals.</p>
<p>To the extent that there is any substance to the treasury’s version, it emphasises the regulation of various sectors of the economy. Yet its proposals are outdated and dubious. They are also inadequately substantiated and contradicted <a href="https://theconversation.com/south-africa-is-planning-more-regulators-this-is-a-bad-idea-123572">by the available evidence</a>. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/south-africa-is-planning-more-regulators-this-is-a-bad-idea-123572">South Africa is planning more regulators: this is a bad idea</a>
</strong>
</em>
</p>
<hr>
<p>For example, the failed regulatory structure in electricity has contributed, and continues to contribute, to the Eskom crisis. Treasury, however, <a href="https://theconversation.com/south-africa-is-planning-more-regulators-this-is-a-bad-idea-123572">wants to replicate that model in transport and water</a>. This isn’t the “evidence-based policy” and a “learning developmental state” that the minister of finance and various economic advisors continually <a href="https://www.gov.za/speeches/minister-tito-mboweni-2018-medium-term-budget-policy-statement-speech-24-oct-2018-0000">pontificate about</a>. Rather it’s the transplanting of ideas of past eras that are pushed by ideological and vested interests.</p>
<p>It is almost two years since Cyril Ramaphosa took over as president of the country and evidence is mounting that the parts of the state being relied on to steer the country out of a potential fiscal and economic crisis – the national treasury and the presidency – lack the intellectual capacity or political savvy required.</p><img src="https://counter.theconversation.com/content/132544/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Seán Mfundza Muller receives funding from a European Union-funded project, "Putting People back in Parliament", led by the Dullah Omar Institute (University of the Western Cape), in collaboration with the Parliamentary Monitoring Group, Public Service Accountability Monitor (Rhodes) and Heinrich Boell Foundation (South Africa). He is affiliated with the Public and Environmental Economics Research Centre (University of Johannesburg), regularly making inputs to Parliament oversight of the national budget, advising civil society groups on public finance matters and consulting for private sector organisations on an ad hoc basis. He resigned from the South African Parliamentary Budget Office in 2016. The views expressed are his own.</span></em></p>The South African government is hamstrung by the country’s fiscal and economic situation. And short of ideas about how to get out of it.Seán Mfundza Muller, Senior Lecturer in Economics, Research Associate at the Public and Environmental Economics Research Centre (PEERC) and Visiting Fellow at the Johannesburg Institute of Advanced Study (JIAS), University of JohannesburgLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1047012018-10-11T09:11:24Z2018-10-11T09:11:24ZSouth Africa’s economy is in a mess. New finance minister must hit the road running<figure><img src="https://images.theconversation.com/files/240064/original/file-20181010-72117-3e0y6p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">South African President Cyril Ramaphosa, left, introduces the country's new Finance Minister, Tito Mboweni, in Cape Town.
</span> <span class="attribution"><span class="source">Phando Jikelo/African News Agency(ANA)</span></span></figcaption></figure><p>The latest <a href="https://www.news24.com/SouthAfrica/News/live-ramaphosa-to-announce-decision-on-nene-20181009">reshuffling</a> of South Africa’s finance minister, following the resignation of Nhlanhla Nene and appointment of Tito Mboweni, may have negative origins but it brings with it some positive energy.</p>
<p>Nene resigned as finance minister after it emerged that he lied about the nature of his contact with the controversial Gupta family, the friends of former President Jacob Zuma who stand accused of championing massive misappropriation of public funds in a process branded as <a href="https://theconversation.com/why-state-capture-is-a-regressive-step-for-any-society-56837">state capture</a>. </p>
<p>In an initial response to a journalist’s question, <a href="https://citizen.co.za/news/south-africa/2017965/nene-lied-at-state-capture-inquiry-eff/">Nene</a> claimed that he had only met the Guptas in passing. But in his recent testimony to a commission investigating state capture he admitted that he’d met Gupta family members on numerous occasions, including a number of visits to their house and their offices. </p>
<p>The inconsistency tarnished his integrity and sparked massive public criticism. Within a week of making his admissions he resigned. South Africa’s President Cyril Ramaphosa immediately appointed former South African Reserve Bank governor Mboweni as the new finance minister.</p>
<p>On the one hand Nene’s departure must be hailed as setting a new tone for South African politicians, particularly for the cabinet. By falling on his sword, he has taken responsibility for his actions – a rarity in South African politics. It’s tempting to cast his action in stone as the “Nene Rule” that sets a standard for politicians to resign when in the wrong.</p>
<p>On the other hand the appointment of Mboweni brings back someone with considerable skills and the political finesse needed to steer South Africa out of its current economic quagmire. </p>
<p>Mboweni needs to hit the ground running. In late October he must present the country’s medium term budget policy framework. All eyes will be on how he steers the challenge of rebalancing the national budget. His political skills and ranking might come in handy. </p>
<h2>Equal to the task</h2>
<p>Mboweni takes over the finance portfolio at <a href="https://theconversation.com/south-africas-budget-some-good-moves-but-not-enough-to-fix-mounting-problems-73529">a difficult time</a>. Tough decisions will be required in a hostile environment as a strong populist wave sweeps through the ruling party, the African National Congress (ANC). </p>
<p>It’s therefore a positive that he commands a more senior political ranking than Nene had within the ANC. Mboweni claimed the <a href="https://www.timeslive.co.za/politics/2017-12-21-anc54-these-are-the-80-members-elected-to-the-nec/">11th position</a> in the tallying of the votes for the ANC’s National Executive Committee (NEC) during the ruling party’s 2017 elective conference that made Ramaphosa the President. The NEC is made up of 80 members and is the ANC’s highest decision making body between conferences. </p>
<p>In addition to this, Mboweni has a strong financial background. He served as governor of <a href="https://www.bloomberg.com/research/stocks/private/person.asp?personId=25853585&privcapId=398625">the South African Reserve Bank</a> from 1999 to 2009. Prior that he served in Nelson Mandela’s first cabinet as minister of labour. </p>
<p>Both experiences should help equip him to meet the economic challenges facing the country. There’s no doubt that he’s knowledgeable about financial matters and is respected among investors. </p>
<p>His tenure at the Reserve Bank should ensure a smooth working relationship between the minister of finance, the national treasury and the central bank. As a previous governor, Mboweni understands this important relationship while valuing the autonomy and the independence of the various institutions and their responsibilities.</p>
<h2>High expectations of Mboweni</h2>
<p>Mboweni will need to be a quick study. He has only two weeks in which to familiarise himself with the details of the medium term budget.</p>
<p>He can’t afford to disappoint. This year’s budget will be watched more intensely than usual by key stakeholders, including investors and credit rating agencies because it follows closely on an <a href="https://theconversation.com/south-africas-stimulus-package-shows-power-is-finely-balanced-in-the-anc-104418">economic stimulus and recovery plan</a> announced by Ramaphosa. Details are expected to be unveiled in the medium term budget.</p>
<p>The medium term budget is also expected to signal how South Africa is dealing with its fiscal challenges. This is where government faces its very hard choices.</p>
<p>The ultimate aim must be to increase economic growth and eradicate unemployment. But to achieve these objectives the government must revise its expenditure priorities.</p>
<p><a href="https://journals.co.za/content/journal/10520/EJC-1077140800">Expenditure</a> on civil service remuneration, social grants and interest on government debt currently equates to 70% of the government’s tax revenue. This is clearly untenable. If not addressed, South Africa will face a fiscal cliff – the point at which these three expenditure items account for all government revenue and make spending on anything virtually impossible.</p>
<p>At the same time, Mboweni will have to work closely with Pravin Gordhan, the Minister of Public Enterprises, on the restructuring of state-owned enterprises. The precarious financial position of a number of state-owned enterprises is placing a heavy burden on taxpayers. Removing this burden will release resources that can be used to stimulate the domestic economy. Mboweni must therefore help with tough decisions about unaffordable vanity projects.</p>
<p>And, finally, Mboweni must sort out the challenges facing <a href="https://www.timeslive.co.za/sunday-times/business/2018-07-27-pic-staff-want-bosses-suspended-to-be-free-to-speak-out-on-corruption/">the Public Investment Corporation</a> which is responsible for managing civil servants’ pension funds and is worth over R1,5 trillion.</p>
<h2>Restoring trust</h2>
<p>South Africa is in serious economic difficulty. It also faces a trust deficit owing to the state capture project of the Zuma administration. The golden triangle of trust between the government, the public and the business community has been broken. No country can succeed without this. Mboweni can play an important role in restoring it.</p><img src="https://counter.theconversation.com/content/104701/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jannie Rossouw is a C-rated NRF researcher and received research funding from the NRF. He was a Deputy General Manager of the SA Reserve Bank in the period that Mr Tito Mboweni serves as Governor. </span></em></p>South Africa’s new finance minister comes with considerable skills and political finesse needed to steer the country out of its economic quagmire.Jannie Rossouw, Head of School of Economic & Business Sciences, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1047022018-10-10T10:18:19Z2018-10-10T10:18:19ZMoral courage and decency irrelevant as South Africa’s finance minister resigns<figure><img src="https://images.theconversation.com/files/240031/original/file-20181010-72103-g6a9i1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Nhlanhla Nene's departure means that South Africa has had six finance ministers in four years. </span> <span class="attribution"><span class="source">GCIS</span></span></figcaption></figure><p>South Africa’s once-lauded, lately beleaguered Finance Minister, Nhlanhla Nene, has had his <a href="https://www.businesslive.co.za/bd/national/2018-10-09-full-speech-cyril-ramaphosa-appoints-tito-mboweni-as-finance-minister/">resignation accepted</a> by President Cyril Ramaphosa. His successor, Tito Mboweni, becomes the country’s sixth finance minister in four years.</p>
<p>The President is desperately trying to dig South Africa out of an unholy mess created by his predecessor Jacob Zuma and his multiple cronies in and out of the governing African National Congress (ANC). The particularly odious <a href="https://www.iol.co.za/news/politics/who-are-the-guptas-2080935">Gupta family</a> have loomed large in what a succession of <a href="https://pari.org.za/betrayal-promise-report/">research projects</a>, commissions of <a href="https://www.sastatecapture.org.za/">inquiry</a>, <a href="https://theconversation.com/two-books-that-tell-the-unsettling-tale-of-south-africas-descent-87044">books</a> and <a href="http://www.gupta-leaks.com/">investigative journalism</a> projects, have labelled <a href="https://www.penguinrandomhouse.co.za/book/republic-gupta-story-state-capture/9781776090891">state capture</a>.</p>
<p>Nene was formerly regarded as “clean”, having <a href="https://theconversation.com/why-zumas-actions-point-to-shambolic-management-of-south-africas-economy-52174">been fired</a> by former President Zuma for refusing to fund his more ludicrous rent-seeking projects. He was replaced by <a href="https://www.news24.com/SouthAfrica/Politics/weekend-special-van-rooyen-should-only-speak-on-saturdays-and-sundays-ndlozi-20160517">Des van Rooyen</a> for a weekend, and then left in the cold while Pravin Gordhan became Finance Minister (before in turn being fired by Zuma). Nene was <a href="https://www.cnbc.com/2018/02/27/ramaphosa-cabinet-reshuffle-sees-investor-favorites-return-to-run-south-africa-economy.html">rehabilitated</a> by Ramaphosa – who defeated the entire Zuma strategy by winning the ANC (and then national) <a href="https://theconversation.com/the-anc-has-a-new-leader-but-south-africa-remains-on-a-political-precipice-89248">presidency</a>. Nene’s reinstatement as Minister of Finance was widely regarded as both politically astute and market-friendly.</p>
<p>But then Nene dropped <a href="https://www.news24.com/SouthAfrica/News/statecaptureinquiry-5-revelations-from-nenes-testimony-20181003">two bombshells</a>: one, that he had met the Gupta brothers at their homes and offices between 2010 and 2014, but had not shared this with Ramaphosa; two, that he had refused to sign off a nuclear deal with Russia that would have simply broken the country financially for decades to come. </p>
<p>And now he is gone.</p>
<p>Did anyone pause to reflect on the fact that after a decade of impunity, this was an act of decency and moral courage? Ignore the party colours, and look at the human being. That is clearly a test all South African politicians <a href="https://theconversation.com/top-political-executives-in-south-africa-dont-resign-they-only-quit-under-duress-72546">failed abysmally</a>. If they have a conscience they clearly forgot to dust it off and use it.</p>
<h2>Widespread guilt</h2>
<p>Almost by definition, anyone who is found to have past dealings with the Guptas – themselves now safely ensconced in mansions <a href="https://www.news24.com/SouthAfrica/News/gupta-fight-goes-to-dubai-20180331">abroad</a> – is unclean. And by definition that includes huge swathes of the political and business classes, whom the Guptas seem to have variously seduced, corrupted, cajoled, threatened or by-passed, depending on the strength of character at stake. </p>
<p>The brilliance of their <a href="https://www.news24.com/SouthAfrica/News/download-the-full-state-of-capture-pdf-20161102">state capture</a> project – laid out recently by the <a href="https://mg.co.za/author/amabhungane">investigative journalists</a> as well as <a href="http://witspress.co.za/catalogue/shadow-state/">various academics</a> – is a roll-call of virtually every senior political figure in South Africa, alongside many business elites. </p>
<p>Some stood up – but a great many folded, seduced by cash or a crass Sun City <a href="https://theconversation.com/is-the-net-about-to-close-on-zuma-and-his-gupta-patronage-network-90395">family wedding invitation</a> or rotten contracts.</p>
<p>Many are in parliament, some are in civil society, others in the private sector – including the consultancy firm <a href="https://www.iol.co.za/business-report/companies/kpmg-to-lay-off-400-people-after-numerous-scandals-15301363">KPMG</a>, and UK-based now defunct PR company <a href="https://theconversation.com/how-pr-giant-bell-pottinger-made-itself-look-bad-83529">Bell Pottinger</a> – and elsewhere. Not all are sitting on ANC benches. Perhaps that is why the President had no option but to remove Nene. Politically, the liability was too great as an election approaches – national elections are due next year – and none are so shrill as those with something to hide.</p>
<p>Nene went to the <a href="https://www.sastatecapture.org.za/">Zondo Commission into state capture</a> and ‘fessed up. Yes, he had met the Guptas. No, he had not taken bribes (well, he would say that, right?). Yes, he had been put under immense pressure to sign off on the nuclear deal which would have opened South Africa’ coffers to looters. Yes, he refused to sign, and was fired.</p>
<p>Remarkably, he had not told Ramaphosa about the earlier meetings with the Guptas. But, he took responsibility – unlike the lies and bluster of others caught in the act. Nene <a href="https://www.iol.co.za/news/politics/read-nhlanhla-nenes-full-statement-on-his-meetings-with-the-guptas-17366241">said to South Africa</a>: </p>
<blockquote>
<p>In return for the trust and faith that you have placed on me, I owe you conduct as a public office bearer that is beyond reproach. But I am human too, I do make mistakes, including those of poor judgement.</p>
</blockquote>
<p>This was followed by his offer to resign. This is accountability and decency. </p>
<h2>Lacking empathy</h2>
<p>In any version of the world, this was a man seeking an honourable redemption. He acknowledged his own mistakes, sought forgiveness, and asked to be relieved of the trappings of office for which so many continue to drool and slobber. </p>
<p>Were there questions to be asked? Absolutely. </p>
<p>But what did he get in return? The Economic Freedom Fighters (EFF), whose leadership has repeatedly been <a href="https://ewn.co.za/Topic/Tax-evasion-and-fraud-charges-against-Julius-Malema">accused of corruption</a>, leapt to the offence, claiming Nene was <a href="https://www.dispatchlive.co.za/news/2018-10-04-nene-is-lying-says-the-eff/">“corrupt as hell”</a> and promising to release more compromising details – which are yet to appear. The opposition Democratic Alliance (DA), desperately seeking the front foot it has lost since Ramaphosa’s ascendancy, <a href="https://www.sowetanlive.co.za/news/south-africa/2018-10-08-ramaphosa-must-accept-nenes-offer-to-resign-das-maynier/">demanded Nene’s axing</a> and wanted other possible conflicts of interest investigated.</p>
<p>Empathy is the ability to understand or feel what another person is experiencing from within their frame of reference. In simple terms, to put yourself in their shoes. It is singularly lacking in politics – from Trump <a href="https://edition.cnn.com/2018/10/02/politics/trump-mocks-christine-blasey-ford-kavanaugh-supreme-court/index.html">mocking abuse survivors</a> to South Africa today. Shout down the other side, win by volume and crassness, see honesty as weakness, but above all win – nothing else seems to matter.</p>
<p>Not one politician had the decency to say ‘that was a decent thing to do.’ The lack of empathy was deafening. A lack of empathy is part of <a href="https://www.psychologytoday.com/us/conditions/narcissistic-personality-disorder">narcissistic personality disorder</a> – an inability or refusal to identify with the feelings of others. This is a rather neat description of politicians, confirmed repeatedly.</p>
<p>If politicians see only personal advantage, especially from the ‘weakness’ of others – weakness defined here as honesty, seeking forgiveness, repentance – then the future is bleak. </p>
<p>But to all those self-serving, smug TV chasing politicians and others, whose own meetings with the Guptas, or other corrupt activities, have yet to come to light, remember one aphorism: people who live in glass houses shouldn’t throw stones.</p><img src="https://counter.theconversation.com/content/104702/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Everatt does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Nhlanhla Nene was highly regarded for refusing to fund former President Zuma’s ludicrous rent-seeking projects.David Everatt, Head of Wits School of Governance, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1021392018-08-28T13:44:20Z2018-08-28T13:44:20ZKey questions the Zondo inquiry needs to pose about the nuclear deal<figure><img src="https://images.theconversation.com/files/233875/original/file-20180828-86135-11cc98u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Deputy Chief Justice Ray Zondo looks into state capture in South Africa's energy sector.</span> <span class="attribution"><span class="source">EPA-EFE</span></span></figcaption></figure><p>South Africa is emerging from a debilitating period where politicians and their benefactors systematically placed pliable individuals into key positions at state institutions to gain undue influence and ultimately financial advantage. The ensuing malaise is called <a href="https://www.dailymaverick.co.za/article/2017-05-26-betrayal-of-the-promise-the-anatomy-of-state-capture/">state capture</a>. </p>
<p>A <a href="https://www.sastatecapture.org.za/">commission of inquiry</a> to investigate state capture was initiated in January, headed by the Constitutional Court’s Deputy Chief Justice Raymond Zondo.</p>
<p>The first week of hearings ended with shocking testimony by former deputy finance minister Mcebisi Jonas. He reiterated his previous claim that a member of the influential Gupta family offered him a bribe of R600 million plus appointment as finance minister in return for favours. He also disclosed, for the first time, that his <a href="https://www.news24.com/SouthAfrica/News/statecaptureinquiry-we-are-in-control-of-everything-jonas-on-what-gupta-brother-told-him-20180824">life was threatened</a> should he fail to cooperate.</p>
<p>Jonas declined the bribe, and eventually went public about the offer – becoming the first and most senior person in government to lay bare the role being played by the Gupta family at former president Jacob Zuma’s behest. The fact that he worked at National Treasury was particularly significant as it was the department that vetted government expenditure. </p>
<p>The testimony of Jonas as well as that of subsequent witness Vytjie Mentor both also <a href="https://www.dailymaverick.co.za/article/2018-08-27-how-vytjie-mentor-resisted-the-gupta-charm/">referred to the proposed nuclear build</a>, and how this was influencing efforts to control state institutions. </p>
<p>The dismissal of Finance Minister Nhlanhla Nene in December 2015 precipitated a <a href="https://www.theguardian.com/business/2015/dec/10/south-africa-finance-minister-nene-departure-drives-rand-down-to-all-time-low">national currency collapse</a> and public outrage that <a href="https://www.news24.com/SouthAfrica/News/timeline-how-south-africa-got-three-finance-ministers-in-four-days-20151214">forced Zuma</a> to remove his replacement after only four days and install Pravin Gordhan. But Gordhan’s tenure was marked by high tension and Zuma <a href="https://theconversation.com/zumas-cabinet-reshuffle-opens-the-door-for-nuclear-deal-in-south-africa-75553">dismissed him</a> in March 2017.</p>
<p>Jonas’s testimony reminded South Africans why Zuma was so keen to have a compliant ally as finance minister. He posited that the reason for the hostility towards Nene was that he was blocking the implementation of a <a href="https://mg.co.za/article/2014-09-23-sa-russia-agree-to-50-billion-nuclear-deal">nuclear deal with Russia</a>.</p>
<p>The inquiry will be probing this further, a welcome development given that so many unanswered questions remain.</p>
<h2>The nuclear deal</h2>
<p>The construction of <a href="https://mg.co.za/article/2010-12-10-countdown-to-nuclear-liftoff">new nuclear power stations</a> was first mooted around 2010 in response to electricity shortages and projected increased future demand. But the idea never gained traction when it became clear that electricity demand was growing less than expected. The hugely expensive new nuclear development was no longer financially defensible.</p>
<p>But Zuma’s government persisted with the idea. It soon became clear that Zuma favoured a Russian bid, and in 2014 the Russian nuclear company <a href="https://rosatomafrica.com/en/">Rosatom</a> stunned the country by announcing it had secured the rights to build the <a href="https://mg.co.za/article/2014-09-23-sa-russia-agree-to-50-billion-nuclear-deal">new South African plants</a>.</p>
<p>It was a move with massive long-term financial implications for South Africa, and <a href="https://www.businesslive.co.za/rdm/politics/2017-01-18-zuma-the-guptas-and-the-russians--the-inside-story/">raised many red flags</a>. The nuclear build soon came to be viewed as the most audacious example of state capture.</p>
<p>One of the questions the inquiry needs to try and answer is why, given that the programme was massively tainted by controversy and was <a href="https://www.iol.co.za/business-report/economy/nuclear-build-programme-is-unaffordable-gigaba-11721499">deemed unaffordable</a>, the ex-president doggedly pursued it.</p>
<h2>The Shiva uranium mine acquisition</h2>
<p>Some reasons are already known. </p>
<p>In 2010 a consortium that included the Gupta family and ex-president Zuma’s son Duduzane <a href="https://www.timeslive.co.za/news/south-africa/2016-05-11-opinion-a-cautionary-tale-about-the-guptas-dud-uranium-mine/">purchased the Dominion uranium mine</a> near Klerksdorp in the North West province. The transaction baffled mining sector observers; in an era of weak global uranium demand, Dominion was <a href="http://www.miningweekly.com/article/uranium-one-shares-plunge-on-froneman039s-surprise-exit-forecast-cuts-2008-02-21/rep_id:3650">considered a poor asset</a>.</p>
<p>But the mine, soon to be renamed Shiva, would become exceptionally valuable if it was going to become the uranium supplier to South Africa’s new nuclear power plants. <a href="https://www.dailymaverick.co.za/article/2018-08-27-how-vytjie-mentor-resisted-the-gupta-charm/">Mentor’s testimony</a> specifically stated that the Guptas already considered themselves the exclusive uranium suppliers. Because of his family association, the former president had a vested interest in the nuclear build coming to fruition.</p>
<p>It was also odd that the transaction <a href="https://www.fin24.com/Economy/nuclear-family-20170423-3">involved Rosatom’s mining subsidiary</a>. </p>
<p>Because the buyers did not have the finance to conclude the purchase, they approached state-linked agencies to attempt to raise the funding. The mine was eventually purchased through a R250 million loan from the <a href="http://mg.co.za/article/2014-12-04-another-state-bonanza-for-the-guptas">Industrial Development Corporation</a>.</p>
<p>The questions that remain unanswered are:</p>
<ul>
<li><p>What were the exact details surrounding the mine purchase, and what was Rosatom’s role in this transaction? And,</p></li>
<li><p>Did ex-president Zuma or other high-ranking officials unduly pressure funding bodies to grant a loan for the mine acquisition?</p></li>
</ul>
<h2>The Russian agreement</h2>
<p>Zuma’s many <a href="http://mg.co.za/article/2014-09-25-jzs-secrete-nuke-stich-up">meetings with his Russian counterparts</a> resulted in the Russian bidders inexplicably receiving preferential status ahead of other potential bidders. This engagement produced an astounding <a href="https://www.fin24.com/Economy/SA-signs-nuclear-deal-with-Russia-20140922">intergovernmental agreement</a>, signed by then Energy Minister Tina Joemat-Pettersson.</p>
<p>After a court challenge from civil society organisations, the Russian agreement was declared <a href="https://theconversation.com/no-nuclear-energy-option-for-south-africa-for-now-at-least-76751">illegal</a>. But this didn’t stop government efforts towards the realisation of a Russian-led nuclear build.</p>
<p>Here the unanswered questions are:</p>
<ul>
<li><p>Why did Joemat-Pettersson sign an agreement she must have known to be unprocedural and irregular?</p></li>
<li><p>Which officials were instrumental in promoting this agreement, and who instructed them?</p></li>
</ul>
<h2>Ministerial reshuffles and redeployments</h2>
<p>The last period of Zuma’s presidency was characterised by the drama of frequent cabinet reshuffles.</p>
<p>National Treasury was at the centre of the reshuffle storm. But the Ministry of Energy was equally afflicted by frequent transitions, with five ministers throughout <a href="https://www.dailymaverick.co.za/opinionista/2018-03-13-south-africas-renewable-nuclear-war/">Zuma’s presidency</a>. </p>
<p>The unanswered questions to the finance and energy ministries are:</p>
<ul>
<li><p>Were two finance ministers and a string of ministers dismissed because they were opposed to the nuclear build, or not pushing it vigorously enough?</p></li>
<li><p>Were these dismissals initiated by ex-president Zuma, or enacted at the request of other parties?</p></li>
</ul>
<h2>Connecting the remaining dots</h2>
<p>The inquiry will undoubtedly investigate the infiltration and abuse of the national power utility Eskom, which also manages South Africa’s nuclear power facilities. In recent years the previously neutral entity had increasingly taken on the role of a <a href="https://www.businesslive.co.za/rdm/business/2017-05-16-we-must-continue-with-our-nuclear-programmes-molefe-tells-eskom-staff/">nuclear lobbyist</a>. </p>
<p>A key question here is:</p>
<ul>
<li>Was the obsessive promotion of the nuclear build by several Eskom leaders driven by a genuine belief in the technology and its affordability, or by pressure?</li>
</ul>
<p>It’s important to know what happened, and how, if South Africa is going to be able to put processes in place that ensure the entire energy sector never becomes compromised again.</p><img src="https://counter.theconversation.com/content/102139/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Hartmut Winkler receives funding from the South African National Research Foundation. He is a member of OUTA and Save South Africa, but writes this article in his personal capacity. </span></em></p>The state capture inquiry will look at why former president Jacob Zuma pursued a dodgy nuclear deal.Hartmut Winkler, Professor of Physics, University of JohannesburgLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/929402018-03-08T14:17:17Z2018-03-08T14:17:17ZCan Ramaphosa centre the ANC and quell opposition parties?<figure><img src="https://images.theconversation.com/files/209526/original/file-20180308-30979-kg74rk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">South African President Cyril Ramaphosa in parliament.</span> <span class="attribution"><span class="source">Brenton Geach/EPA</span></span></figcaption></figure><p>These are early days for the new <a href="https://mg.co.za/article/2018-03-01-ramaphosa-plays-the-hand-he-was-dealt">Cyril Ramaphosa-led government</a> in South Africa. Two crucial and inter-related strategic challenges face the new President: to consolidate support within the African National Congress (ANC), and to consolidate the ANC’s position as the dominant party in time for the 2019 national elections, seeking to reverse the decline it had experienced under Jacob Zuma.</p>
<p>Dealing with internal ANC issues is the most difficult and the foundation for the others. Zuma is <a href="https://theconversation.com/zumas-time-is-up-but-what-does-it-mean-for-south-africa-91873">out of power</a>, and will not be back. Even though his departure will weaken their capacity to work as a coherent force, it will <a href="https://theconversation.com/the-zuma-regime-is-dead-but-its-consequences-will-linger-for-a-long-time-92066">take time</a> to dismantle the alliance that made up disparate elements he built around him. </p>
<p>Ramaphosa has started the job by <a href="https://mg.co.za/article/2018-02-26-cyril-ramaphosa-cabinet-reshuffle-reaction-anc-da-eff-ifp">removing</a> the most obvious symbols of Zuma’s alliance with the <a href="http://www.bbc.com/news/world-africa-22513410">Gupta family</a> who stand accused of being the major perpetrators of <a href="https://qz.com/825789/state-capture-jacob-zuma-the-guptas-and-corruption-in-south-africa/">state capture</a>. These include former ministers such as <a href="http://ewn.co.za/Topic/Communications-Minister-Faith-Muthambi">Faith Muthambi</a> who ran public administration and <a href="http://ewn.co.za/Topic/Mosebenzi-Zwane">Mosebenzi Zwane</a> who had been given the minerals portfolio. Both became notorious through combining incompetence and corruption, and have no independent power based within the ANC. </p>
<p>Others who had some internal support were demoted into less prestigious and powerful positions – <a href="http://www.huffingtonpost.co.za/2018/02/26/bathabile-dlamini-for-women-what-the-actual-hell-say-tweeters_a_23371557/">Bathabile Dlamini</a> who has been made minister of women and children and <a href="https://mg.co.za/tag/malusi-gigaba">Malusi Gigaba</a> who is back at home affairs come to mind. </p>
<p>Picking fights carefully so as not to tackle all adversaries simultaneously is a wise political strategy. Having won with a small margin does not allow him to go ahead with massive purges, an unwise course of action in any event.</p>
<p>As far as trying to forge the ANC into a cohesive force again, Ramaphosa’s real challenge remains closer to the ground. Among local ANC members and representatives an entrenched ethos sees positions of power as key to material benefit and jobs for relatives, friends and political allies. Tackling this is not going to be easy and it’s not clear that Ramaphosa will be able to do it – certainly not in the immediate term.</p>
<h2>ANC as the dominant party?</h2>
<p>His urgent task is to address the <a href="https://theconversation.com/jacob-zumas-demise-is-bad-news-for-south-africas-opposition-parties-91771">electoral challenges</a> posed by the two main opposition parties, the Democratic Alliance (DA) and the Economic Freedom Fighters (EFF). Both cater to different constituencies disillusioned. </p>
<p>The DA’s main policy platform focuses on good governance and rational management. The EFF’s on <a href="https://www.fin24.com/Opinion/is-julius-malemas-eff-a-nation-builder-or-a-wrecking-ball-20180307">radical social change</a>. Their shared opposition to the ANC has made them strange bedfellows in a number of key municipalities, thus removing the ANC from power. But this has already begun to unravel in the wake of Ramaphosa’s ascendancy. In <a href="https://www.dailymaverick.co.za/article/2018-03-04-nelson-mandela-bay-effs-attempt-to-remove-trollip-ushers-in-a-new-unstable-era-for-coalition-politics/#.WqEhVWpubIU">Nelson Mandela Bay</a> the EFF has withdrawn support for the DA, its dominant coalition partner. More political shifts like this may take place in preparation for the next elections.</p>
<p>Ramaphosa can undercut the DA threat by his (re-)appointment of reputable and fiscally-responsible people. He has already done so in the National Treasury with <a href="https://theconversation.com/ramaphosa-has-chosen-a-team-that-will-help-him-assert-his-authority-92538">Nhlanhla Nene</a> and at public enterprises with <a href="https://www.fin24.com/Economy/pravin-gordhan-back-this-time-as-minister-of-public-enterprises-20180226">Pravin Gordhan</a>. And eliminating blatant cases of nepotism and corruption will also <a href="https://www.businesslive.co.za/bd/opinion/2018-03-01-why-a-complacent-da-could-lose-cape-town-to-anc/">steal DA votes</a> for the ANC.</p>
<p>But tackling the EFF is a more complicated task, as illustrated by the recent reemergence of the land issue, which is now the <a href="https://m.news24.com/SouthAfrica/News/if-you-see-a-beautiful-piece-of-land-take-it-malema-20170228">its clarion call</a>. Can this issue affect the ANC’s electoral prospects? What seems to be Ramaphosa’s strategy in the face of this potential threat? </p>
<p>Land isn’t a new issue, having been a material and symbolic <a href="http://www.sahistory.org.za/topic/land-act-dispossession-segregation-and-restitution">concern for centuries</a>. Colonial conquest and settlement centred on the acquisition of land by force, which played a crucial role in driving indigenous people into the labour market in the 19th and 20th centuries. Addressing the consequences of the <a href="http://www.sahistory.org.za/topic/natives-land-act-1913">1913 Natives Land Act</a> was a formative experience for the ANC, which had been <a href="http://www.sahistory.org.za/topic/anc-origins-and-background">created</a> in the previous year, and remains a challenge to this day. </p>
<p>Land dispossession entrenched the distinctive feature of the South African economy: <a href="http://www.sahistory.org.za/archive/the-migrant-labour-system">migrant labour</a> as the foundation for black deprivation and white prosperity. </p>
<p>In 1994 a <a href="http://www.sahistory.org.za/article/land-restitution-south-africa-1994">land restitution process</a> was put in place by the newly elected ANC government. But it hasn’t met the intended targets for a number of reasons. These have included bureaucratic inefficiency, inadequate support structures for small-scale farmers (in financing, marketing, skill development), conflicts among beneficiaries, corruption and limited interest due to the meagre political weight of claimants.</p>
<p>While it is clear that the cost of land due to the need to offer compensation is not the main problem hampering land reform, it has become symbolic of the obstacles facing the process. When the ANC <a href="https://www.businesslive.co.za/bd/national/2018-02-27-parliament-adopts-effs-land-claims-motion-but-anc-seeks-amendments/">joined</a> the EFF in parliament in referring the compensation clause for review, it recognised that opposing the motion would be risky, allowing the EFF to speak on behalf of land-hungry people. </p>
<p>It showed that the land conundrum is <a href="https://m.news24.com/Columnists/MaxduPreez/real-action-on-land-needed-to-counter-extreme-eff-rhetoric-20180306">electorally dangerous</a> for the ANC.</p>
<p>On the other hand, supporting the motion but amending it to conform to other imperatives (stable economy, increased agricultural production, food security) could keep the ANC ahead of the political challenge while retaining its ability to shape the outcome of the review to suit its general policy direction. </p>
<p>Meeting the challenges from the opposition parties will strengthen the ANC’s dominance and Ramaphosa’s control internally. The internal and external challenges could therefore be met in an integrated way. In a sense, this would allow it to return to the position it had enjoyed during Nelson Mandela’s tenure, exercising hegemony over state and society. </p>
<p>But the road is still long and full of obstacles.</p><img src="https://counter.theconversation.com/content/92940/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ran Greenstein does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Meeting the challenges from the opposition will strengthen the ANC’s dominance. How well its new leadership copes will become clearer over the next few months.Ran Greenstein, Associate Professor of Sociology, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/925382018-02-27T15:19:14Z2018-02-27T15:19:14ZRamaphosa has chosen a team that will help him assert his authority<figure><img src="https://images.theconversation.com/files/208119/original/file-20180227-36680-1x0i4mv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">President Cyril Ramaphosa during the late night announcement of his new cabinet. </span> <span class="attribution"><span class="source">Elmond Jiyane, GCIS</span></span></figcaption></figure><p><em>South Africa’s new president, Cyril Ramaphosa, <a href="https://www.news24.com/Analysis/graphic-all-the-changes-ramaphosa-made-to-cabinet-20180227">has announced</a> his cabinet. As widely expected, he either fired or demoted almost all cabinet ministers implicated in corruption or considered incompetent who served under Jacob Zuma. In their stead Ramaphosa appointed his dream team to key ministries, bringing back former finance ministers Nhlanhla Nene and Pravin Gordhan both of whom had been fired by Zuma. But, contrary to expectations, he kept some ministers widely believed to have made a hash of their jobs. Politics and Society editor Thabo Leshilo asked Keith Gottschalk for his perspective.</em></p>
<p><strong>Is the new Cabinet fit for purpose - is it better equipped to do what needs to be done?</strong></p>
<p>This was a major shuffle, affecting two-thirds of ministers, more than most analysts had expected. </p>
<p>The new cabinet is undoubtedly better than the one that served under Zuma. The ministers incriminated in subverting procurement procedures for the benefit of the <a href="https://mg.co.za/tag/gupta-brothers">Guptas</a>, or at best, above their level of competence, have vanished. The Guptas’s were allied to Zuma and were at the heart of corruption and <a href="https://www.news24.com/SouthAfrica/News/FULL-TEXT-Statement-by-Public-Protector-on-Nkandla-Report-20140319">state capture </a> in the country.</p>
<p>The independence and competence of Gordhan, who has come back to serve as minister of Public Enterprises, and Nene who returns to the finance minister post, are welcome and will be well received by the markets. The appointment of <a href="https://www.gov.za/about-government/contact-directory/grace-naledi-mandisa-pandor-ms">Naledi Pandor</a> to Higher Education and Training is a good fit. Her views and temperament match with the vice-chancellors of higher education institutions.</p>
<p>Ramaphosa appointed two former ministers to their previous jobs: <a href="https://www.pa.org.za/person/derek-andre-hanekom/">Derek Hanekom</a>, who was fired by Zuma, is back running tourism and <a href="https://www.ft.com/content/f45af228-1a10-11e7-a266-12672483791a">Malusi Gagaba</a>, who relinquished the finance ministry, has been put back in charge of Home Affairs. An obvious posting for Nkosazana Dlamini-Zuma, who ran against Ramaphosa for the position of president of the African National Congress, would have been her former portfolio in international relations. Instead she has become a minister within the presidency.</p>
<p>The country is onto its eleventh minister responsible for energy since 1994. This time the post has gone to <a href="https://www.gov.za/about-government/contact-directory/jeffrey-thamsanqa-radebe-mr">Jeff Radebe</a>. Each of the previous incumbents lasted an average of 2.4 years. </p>
<p>In future the revolving door of ministers, directors-general and deputy directors general will need to end.</p>
<p>Before then, there will be at least one more shuffle and pruning when, as Ramaphosa has <a href="https://www.timeslive.co.za/politics/2018-02-16-ramaphosa-promises-to-cut-bloated-cabinet/">indicated</a>, the cabinet and the number of state departments are cut back. </p>
<p>It is a rule of thumb in political science that the poorer a country, the bigger its cabinet. The USA’s includes the Vice President and the heads of <a href="https://www.whitehouse.gov/the-trump-administration/the-cabinet/">15 executive departments</a>. South Africa’s is <a href="https://www.gov.za/about-government/leaders/profile/1083">35</a>, up from 30 <a href="http://www.sahistory.org.za/article/1994-cabinet">under Nelson Mandela</a>.</p>
<p><strong>What does all this augur for the future, and Ramaphosa’s success?</strong></p>
<p>Politics, except under a dictatorship, involves negotiating trade-offs with those with whom you have to negotiate, not only with those you would like to have as your allies. A winner only wins because he or she has formed a coalition of factions which outnumbers the rival coalition of factions.</p>
<p>Ramaphosa had to do some fancy footwork. This is because there’s broad consensus that his narrow victory over Nkosazana for the presidency was solely due to the intervention of the premier of Mpumalanga David Mabuza who ordered his followers to switch their votes at the last minute. Ramaphosa squeaked through. And, notwithstanding Ramaphosa’s preference for Pandor as his deputy, Mabuza won the necessary backing. Ramaphosa announced Mabuza’s appointment as deputy president of the country as part of his cabinet announcement. (Convention has it that the president and deputy president of the ANC serve as president and deputy president of the country.)</p>
<p>Making Dlamini-Zuma a minister within the presidency is clearly also a gesture of inclusivity to the anti-Ramaphosa faction.</p>
<p>Overall, Ramaphosa has a cabinet that forms a team he can work with, and that will help him assert his authority. As he <a href="http://www.thepresidency.gov.za/press-statements/president-ramaphosa-announces-changes-national-executive">said</a> in announcing it:</p>
<blockquote>
<p>These changes are intended to ensure that national government is better equipped to implement the mandate of this administration and specifically the tasks identified in the State of the Nation Address.</p>
</blockquote><img src="https://counter.theconversation.com/content/92538/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Keith Gottschalk is an ANC member, but writes this in his professional capacity as a political scientist.</span></em></p>Overall South Africa’s new president has a cabinet that forms a team with whom he can work.Keith Gottschalk, Political Scientist, University of the Western CapeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/920512018-02-20T13:01:19Z2018-02-20T13:01:19ZSouth Africa must resist another captured president: this time by the markets<figure><img src="https://images.theconversation.com/files/207235/original/file-20180221-132680-1l9blwl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Cyril Ramaphosa addresses MPs after being elected president of South Africa.</span> <span class="attribution"><span class="source">Reuters/Mike Hutchings</span></span></figcaption></figure><p>The African National Congress (ANC) has made a dangerous habit of bringing post-apartheid South Africa to the brink of instability and the common ruin of all. The <a href="https://www.businesslive.co.za/bd/national/2018-02-14-president-jacob-zuma-resigns/">resignation</a> of former President Jacob Zuma and his <a href="https://www.news24.com/SouthAfrica/News/live-goodbye-zuma-hello-president-cyril-20180215">replacement</a> by Cyril Ramaphosa was such a moment. It brought home the point that the over-concentration of power in the office of the president has clearly not worked. </p>
<p>A rethink on president-centred politics and the threats it poses to the democracy are crucial for the post-Zuma period. South Africa needs to re-imagine democratic practice, leadership and how power works. </p>
<p>Some sections of South African society have reduced the Zuma problem to a corruption problem. Dismantle Zuma’s <a href="https://www.news24.com/SouthAfrica/News/zuma-turned-sa-into-mafia-style-lawless-kleptocracy-saftu-20170805">kleptocratic network</a>, the argument goes, and all is solved. Zuma’s demise and a few high profile prosecutions will suffice. </p>
<p>But another view on the Zuma problem – and one with which I concur – suggests it is a problem of contending class projects inside the ANC. The <a href="http://sacsis.org.za/site/article/1789">neoliberal class project</a> under Presidents Nelson Mandela and Thabo Mbeki saw South Africa integrated into global markets. It maintained stability through modest redistributive reforms. This project laid the basis for a new black middle class to <a href="https://monthlyreview.org/2003/01/01/neoliberalism-and-resistance-in-south-africa/">emerge</a> while systematically <a href="http://uir.unisa.ac.za/bitstream/handle/10500/14466/theresponsesoftradeunionstotheeffectsofneoliberalisminsouthafrica.pdf?sequence=1">weakening</a> labour and the left.</p>
<p>But it <a href="https://www.globalresearch.ca/the-neoliberal-squeeze-on-post-apartheid-democracy-reclaiming-the-south-african-dream/28453">surrendered</a> the state (including the presidency) to transnational capital and the power of finance. </p>
<p>The Zuma project, on the other hand, <a href="https://www.fin24.com/Opinion/zumas-radical-economic-transformation-is-state-looting-20170404">advanced looting</a> as the basis of accumulation and class formation. The <a href="https://www.news24.com/Columnists/MaxduPreez/the-fatal-flaw-in-project-state-capture-20171205">extra-constitutional state</a> that emerged deepened the macroeconomic, institutional and legitimacy crisis of the ANC-led state. The left and labour, aligned with the ANC in the tripartite alliance, were <a href="https://www.moneyweb.co.za/moneyweb-opinion/sa-workers-must-brace-for-a-dark-new-year/">co-opted</a> and divided. Both these projects are entrenched in the ANC.</p>
<p>Now what? Messiah-centred presidential politics is extremely dangerous. This is particularly true in a country of extreme inequality and with a formal concentration of power in the office of the president. If politics is not represented, thought and acted beyond this, South Africa is going to repeat historical mistakes.</p>
<p>Since the ANC’s December 2017 conference the media, the banks and international institutions have been talking up a narrative of the <a href="http://www.huffingtonpost.co.za/2018/01/25/the-gaining-rand-and-the-cyril-effect-what-it-means-for-your-pocket_a_23343014/">“Cyril effect”</a>. Zuma’s removal is attributed to this. In fact the Cyril effect is a <a href="http://www.huffingtonpost.co.za/2018/02/12/will-sas-economy-really-benefit-from-the-cyril-effect_a_23359238/">narrative</a> of capture of South Africa’s new president by transnational and financial capital.</p>
<p>South Africa’s democracy cannot afford another captured president beholden to <a href="https://www.fin24.com/Economy/ratings-agencies-note-ramaphosas-election-but-swift-upgrade-unlikely-20180215">credit rating agencies</a>, <a href="https://www.iol.co.za/business-report/opinion-ramaphosa-isnt-the-only-winner-so-is-the-rand-12486405">currency fluctuations</a>, investment flows and business <a href="https://www.reuters.com/article/safrica-economy/south-african-mining-seen-a-winner-as-ramaphosa-woos-investors-idUSL8N1PJ4EN">perceptions</a>. South Africa’s democracy has to be grounded in the needs of its citizens and the mandates given by its Constitution.</p>
<h2>The ‘Cyril effect’ is hyperbole</h2>
<p>The end of Zuma was in fact not because of the Cyril effect. In the main Zuma was removed by the <a href="http://www.bbc.com/news/world-africa-17450447">people’s effect</a> which connected the dots of corruption, a mismanaged state and rapacious capitalism. </p>
<p>This resistance was expressed over 15 years through various institutions and social forces. These included:</p>
<ul>
<li><p>Battles inside the South African Communist Party (SACP) against <a href="https://www.greenleft.org.au/content/south-africa-zumafication-left-politics-alliance">Zumafication</a> but which led to expulsions;</p></li>
<li><p>By feminists during Zuma’s rape trial and subsequently through <a href="https://www.dailymaverick.co.za/article/2016-10-09-rememberkhwezi-zumas-rape-accuser-dies-never-having-known-freedom/#.Wovpsa6WbIU">#RememberKhwezi</a>;</p></li>
<li><p><a href="https://www.zapiro.com/120520st">Artists</a> and cartoonists lampooning Zuma, including with <a href="https://www.zapiro.com/">shower heads</a>;</p></li>
<li><p>The ongoing struggles in communities against <a href="https://theconversation.com/how-ancs-path-to-corruption-was-set-in-south-africas-1994-transition-64774">corrupt officials</a>;</p></li>
<li><p>The <a href="https://theconversation.com/marikana-shining-the-light-on-police-militarisation-and-brutality-in-south-africa-44162">Marikana massacre</a> in 2012. This produced rage among workers and major realignments away from Zuma’s ANC;</p></li>
<li><p>The <a href="http://ewn.co.za/2014/04/20/Numsa-calls-for-Zuma-to-resign">call</a> by trade unions like the metalworkers’ Numsa for Zuma’s removal;</p></li>
<li><p>The <a href="http://www.polity.org.za/article/sa-statement-by-the-sidikiwe-vukani-vote-no-campaign-calls-on-south-africans-to-endorse-campaign-16042014-2014-04-16">Vukani-Sidikiwe</a> campaign during the 2014 elections which opened up a national debate on how citizens should vote; </p></li>
<li><p>The rise of #ZumaMustGo Campaign. This was in response to the sacking of <a href="https://theconversation.com/the-removal-of-south-africas-finance-minister-is-bad-news-for-the-country-52170">Nhlanhla Nene</a> as finance minister in December 2015. The NUMSA-led United Front played a crucial role in this;</p></li>
<li><p>The <a href="https://theconversation.com/what-zumamustfall-and-feesmustfall-have-in-common-and-why-it-matters-53115">#FeesMustFall</a> movement. Students’ demands included labour insourcing as well as quality, decommodified and decolonised higher education;</p></li>
<li><p>The <a href="https://www.news24.com/elections/results/lge">2016 local government elections</a>. These were a harbinger of seismic political realignments against the ANC in key cities;</p></li>
<li><p>The role of <a href="http://amabhungane.co.za/">investigative and nonpartisan media</a> in probing corruption scandals. And the publication of the <a href="http://www.gupta-leaks.com/">Gupta-leaks</a> as well as <a href="http://www.jacana.co.za/book-categories/new-releases-65840/a-simple-man-kasrils-and-the-zuma-enigma-detail">“A Simple Man”</a> and <a href="https://theconversation.com/two-books-that-tell-the-unsettling-tale-of-south-africas-descent-87044">“The President’s Keepers”</a>;</p></li>
<li><p>The courageous role from 2010 onwards of then <a href="http://www.sahistory.org.za/people/thulisile-nomkhosi-madonsela">public protector Thuli Mandonsela</a> in drawing attention to ethics and legal violations by Zuma;</p></li>
<li><p>Court decisions affirming the <a href="https://www.cfr.org/blog/display-judicial-independence-south-african-court-denies-zuma-again">judiciary’s independence</a> in relation to Zuma;</p></li>
<li><p>Zuma’s miscalculation in <a href="https://theconversation.com/stakes-for-south-africas-democracy-are-high-as-zuma-plunges-the-knife-75550">firing finance minister Pravin Gordhan</a>, the rallying of activists and the rise of <a href="http://www.savesouthafrica.org/">#SaveSouthAfrica</a>. What followed were some of the largest post-apartheid <a href="https://theconversation.com/rebellion-is-on-the-march-against-zuma-but-will-it-be-enough-to-oust-him-75862">protest marches</a>;</p></li>
<li><p>The powerful voice of liberation struggle veterans like <a href="https://theconversation.com/ahmed-kathrada-exhibit-a-of-the-values-imbued-in-south-africas-freedom-charter-75339">Ahmed Kathrada</a> and others who called for Zuma to resign.</p></li>
</ul>
<h2>The ANC’s legitimacy crisis</h2>
<p>As a result of all this activity the crisis of legitimacy in the ANC – and the ANC state – has deepened. This has placed immense pressure on the party to act. In this context, Ramaphosa is playing out his role out of necessity and to secure the ANC’s electoral fortunes.</p>
<p>For middle class and rich South Africans Ramaphosa’s <a href="http://www.thepresidency.gov.za/speeches/state-nation-address-president-republic-south-africa%2C-mr-cyril-ramaphosa">state of the nation</a> speech represented a return to normalcy – a democracy that works for a few. That’s not to say that the new president didn’t make some important announcements in his state of the nation address. This included his comments about state owned enterprises, redistributive state programmes and anti-corruption mechanisms. </p>
<p>Nevertheless, the speech struck chords that resonated with the “return to normalcy” narrative.</p>
<p>But South Africans can’t repeat the mistake made in 1994 when progressive civil society <a href="http://www.tandfonline.com/doi/full/10.1080/01436597.2012.666011?scroll=top&needAccess=true">demobilised</a>. The people’s effect has to continue to shape a post-Zuma democracy in the interests of all. The ANC has abused majority support and cannot be trusted with the future of South Africa.</p>
<p>People’s power has to be strengthened and continuously mobilised around strengthening democratic institutions, ending corruption, fundamental economic transformation and advancing systemic alternatives to the climate crisis.</p><img src="https://counter.theconversation.com/content/92051/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Vishwas Satgar receives funding from the Rosa Luxemburg Foundation and the National Institute of the Humanities and Social Sciences. He has been engaged in various activist initiatives against the Zuma Regime. </span></em></p>Jacob Zuma was removed by the people’s effect, which connected the dots of corruption, a mismanaged state and rapacious capitalism.Vishwas Satgar, Associate Professor, Department of International Relations, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/909552018-02-07T14:41:32Z2018-02-07T14:41:32ZSouth Africa’s future hinges on Ramaphosa’s strategic skills<figure><img src="https://images.theconversation.com/files/205323/original/file-20180207-74509-d1kson.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Deputy President of South Africa and leader of the country's governing party, the ANC.</span> <span class="attribution"><span class="source">GCIS</span></span></figcaption></figure><p>South Africa’s 2018 State of the Nation address by the president of South Africa has been <a href="http://ewn.co.za/2018/02/07/curiosity-confusion-and-comedy-after-sona-postponed">postponed</a>. This unprecedented step makes it clear that the country is seeing the final days of Jacob Zuma as president although it may take a day or a week or two before things are finalised.</p>
<p>What’s important is that Zuma isn’t allowed to detract from the momentum that newly elected ANC president Cyril Ramaphosa has started to build. This has included a successful trip to Davos where he unequivocally pulled the carpet from under the <a href="https://www.iol.co.za/business-report/economy/we-have-excess-power-and-no-money-ramaphosa-on-nuclear-plan-12934073">nuclear power programme</a> favoured by Zuma.</p>
<p>Ramaphosa has been working diligently to corral Zuma’s remaining freedom of action. Zuma was finally persuaded to establish a <a href="https://www.news24.com/SouthAfrica/News/state-capture-commission-must-investigate-all-state-corruption-focus-on-guptas-20180125">commission of enquiry into state capture</a> and Ramaphosa started restoring credibility to the management of <a href="https://citizen.co.za/news/south-africa/1789190/new-eskom-ceo-and-board-chair-appointed-koko-and-singh-others-to-be-removed-says-presidency/">state owned enterprises</a>. </p>
<p>The momentum built by Ramaphosa seems sufficient to avoid the most pressing concern, the spectre of a <a href="https://www.fin24.com/Economy/moodys-now-places-sa-inc-on-downgrade-review-20171129">downgrade</a> of South Africa’s long term local currency debt rating by the rating agency Moody’s. Such a step would trigger South Africa being excluded from <a href="https://www.iol.co.za/business-report/sa-faces-many-economic-headwinds-12486144">Citi’s World Governance Bond Index</a>. RMB Morgan Stanley projects a potential <a href="https://www.iol.co.za/business-report/sa-faces-many-economic-headwinds-12486144">outflow of US $5 billion</a> if this happened.</p>
<p>But his freedom of action is severely constrained by his narrow victory during the ANC’s leadership elections and the divisions within the party’s top leadership. The party has no choice but to design an early exit strategy for Zuma, or suffer significant political damage during the 2019 elections.</p>
<p>A downgrade would constrain growth and severely affect the ANC’s 2019 election prospects. Ramaphosa needs his own mandate, which only the 2019 national elections can deliver. </p>
<h2>Economic growth</h2>
<p>In November last year Ramaphosa outlined an economic plan aimed at <a href="https://www.biznews.com/thought-leaders/2017/11/14/ramaphosa-new-deal-for-sa/">generating jobs and economic growth and tackling inequality</a>. The plan set a growth target of 3% for 2018, rising to 5% by 2023. </p>
<p>For its part the Reserve Bank has forecast the economy will grow by a measly 1.4% in 2018 and 1.6% in 2019. The International Monetary Fund is even more pessimistic, forecasting growth of 1.1% for this year. </p>
<p>Nothing is more important for South Africa – and Ramaphosa as the country’s incoming president – than growth and translating that growth into employment creation. That, in turn, requires foreign and domestic investment, which is only possible with policy certainty and rapid movement to a new leadership. It also requires a positive partnership with the private sector.</p>
<p>Assuming Zuma’s exit is imminent, serious consideration needs to be given to the team that Ramaphosa must put in place to help him achieve the economic turnaround he envisages. This brings us to the need for a cabinet reshuffle, including the appointment of a credible minister of finance. </p>
<h2>Next steps</h2>
<p>South Africa has a cabinet which is double the size required. A few ministers, such as Rob Davies at trade and industry and Naledi Pandor in science and technology, have established their credibility. But a large number of the current cabinet shouldn’t be considered for inclusion under a Ramaphosa administration. </p>
<p>The most important post is the minister of finance. Given the fact that former finance minister Nhlanhla Nene seems to have moved on, it is likely that either Pravin Gordhan or his then deputy Mcebesi Jonas will be invited back.</p>
<p>Ramaphosa needs to turns his narrow victory into a positive outcome. And he must convince non-voting ANC supporters who abandoned the ANC under Zuma to return to the fold of the governing party in 2019. </p>
<p>It will also depend on legal processes – such as the various probes into corruption and state capture – to strip out the internal contradictions within the top leadership of the ANC.</p>
<p>Long term voting trends indicate declining support for the ANC and as things stand, a divided ANC remains a plump target for opposition parties. It could see support decline from its current 62% nationally by around 10 percentage points in 2019 if that trend is not reversed. The impact of these developments were set out in a recent book <a href="http://www.jonathanball.co.za/component/virtuemart/fate-of-the-nation-detail?Itemid=6">Fate of the Nation</a> that included political and economic scenarios to 2034.</p>
<p>A more positive party future requires the ANC to rapidly rediscover its unity although this seems unlikely in the short term. And here is the nub – as much as the traditionalist faction is associated with corruption and state capture, it also represents a strong ideological current that could still derail the party and even lead to it splintering. </p>
<p>Ramaphosa has been dealt a weak hand but he has proven to be a consummate strategist. The next few days and weeks will be crucial and are likely to determine South Africa’s future for several years to come.</p><img src="https://counter.theconversation.com/content/90955/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jakkie Cilliers does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>President Jacob Zuma shouldn’t be allowed to detract from the momentum that Cyril Ramaphosa, the new president of the ruling ANC, has started to build.Jakkie Cilliers, Chair of the Board of Trustees and Head of African Futures & Innovation at the Institute for Security Studies. Extraordinary Professor in the Centre of Human Rights, University of PretoriaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/873952017-11-14T12:26:23Z2017-11-14T12:26:23ZWhat the hijacking of South Africa’s Treasury means for the economy<figure><img src="https://images.theconversation.com/files/194547/original/file-20171114-27625-1plraev.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">There are claims President Jacob Zuma may push through irresponsible proposals relating to higher education funding.</span> <span class="attribution"><span class="source">Reuters</span></span></figcaption></figure><p><em>South Africa has been rocked by <a href="https://www.timeslive.co.za/politics/2017-11-13-top-treasury-official-quits-in-row-over-free-tertiary-education/">news</a> that President Jacob Zuma has bulldozed the country’s National Treasury to adopt a fee free higher education proposal without following standard process and scrutiny. This is reportedly what’s behind the resignation of the Treasury’s respected head of budgeting, <a href="http://ewn.co.za/2017/11/13/treasury-confirms-michael-sachs-resignation">Michael Sachs</a>. The Conversation Africa’s Sibonelo Radebe asked Seán Muller to weigh up the implications.</em></p>
<p><strong>How significant is the resignation?</strong></p>
<p>Reports indicate that the resignation came as a result of interference in the budgeting process. There appears to have been an attempt to push through irresponsible proposals relating to higher education funding. From a technocratic perspective this is a serious a blow to the Treasury’s credibility.</p>
<p>What’s unfolding can be seen as a continuation of the “state capture” inspired attack on National Treasury that began in 2015 with the firing of the then finance minister <a href="https://theconversation.com/why-south-africa-should-gird-itself-for-tumultuous-times-52161">Nhlanhla Nene</a>. The attack was temporarily halted and Zuma had to reverse the appointment of trusted ally Des van Rooyen.</p>
<p>The president relented by bringing back trusted finance minister <a href="https://mg.co.za/article/2017-03-30-report-president-jacob-zuma-has-fired-finance-minister-pravin-gordhan">Pravin Gordhan</a>. But then he fired Gordhan early this year and replaced him with another ally <a href="https://www.ujuh.co.za/south-africas-new-finance-minister-tries-to-assure-the-markets/">Malusi Gigaba</a>. This was followed by the departure of the department’s director general <a href="https://www.businesslive.co.za/bd/national/2017-04-05-lungisa-fuzile-quits-will-more-senior-treasury-officials-follow/">Lungisa Fuzile</a>.</p>
<p>The head of the budget office is arguably one of the most important positions within the Treasury. The incumbent, Sachs, played a pivotal role in protecting the country’s public finances while also increasing transparency and engagement with civil society. </p>
<p>He is the son of former constitutional court judge and anti-apartheid activist Albie Sachs, and a former member of the ANC’s Economic Transformation Committee. He had unparalleled insight into both the bureaucratic and political sides of the budget process. His resignation indicates the extent to which political dysfunction has compromised responsible management of public finances.</p>
<p><strong>How does the proposal for increasing higher education funding compromise the budget process?</strong></p>
<p>One of the major achievements of post-1994 governments was to embed a thorough, bureaucratic and political process of developing the annual national budget and the medium-term budget. Within this process, any major changes to budget priorities are signalled in the medium-term budget. They are then gradually integrated into successive national budgets. </p>
<p>Any intention to dramatically change the structure of the budget – for instance, by cutting social grants in order to pay university fees – should have been contained in the medium-term budget.</p>
<p>In the current case, the <a href="https://www.news24.com/SouthAfrica/News/sa-doesnt-have-money-for-free-higher-education-heher-commission-20171113">Heher Commission</a>, under retired Judge Jonathan Heher was established to investigate higher education funding. It <a href="http://www.presidency.gov.za/press-statements/release-report-commission-inquiry-feasibility-making-high-education-and-training">handed its report to the president on the 30th of August</a>, before the presentation of the 2017 medium-term budget policy statement. Its findings should have been released earlier and any decision reflected in the medium-term budget. That would have provided a basis for Parliament to facilitate democratic oversight of the proposals and alerted citizens and stakeholders to government’s intention.</p>
<p>What’s more worrying are reports that the president has ignored the Heher Commision’s recommendations. Given the extensive consultation by this commission, it would arguably be irrational and irresponsible to ignore its findings and implement an ill-conceived, “populist” removal of university fees. </p>
<p>Regardless of the merits of such proposals, to try and ram them through in the period between the medium term budget, in October, and the national budget in February is reckless. It will undermine the credibility of South Africa’s public finance management and carries negative implications for investment, credit ratings and economic growth.</p>
<p><strong>What is your view on the call for free university education?</strong></p>
<p>We should start with the widely accepted principle that no student who is suitably qualified for university education should be prevented from pursuing it. Given this principle we then need to ask the following questions:</p>
<ul>
<li><p>How many students does the basic education system adequately prepare for higher education?</p></li>
<li><p>How many of those need financial support and to what extent?</p></li>
<li><p>What are the total cost implications of providing all such students with the necessary support, whether in grants or loans? </p></li>
<li><p>Can the country afford to do this for all such students immediately?</p></li>
<li><p>Even if we can afford it, is it the most equitable use of such funds?</p></li>
</ul>
<p>I have <a href="https://theconversation.com/south-africas-feesmustfall-protests-some-inconvenient-truths-67516">argued previously</a> that too many students are being admitted into the higher education system. Many are ill-prepared given the poor quality in the schooling system.</p>
<p>Evidence on the household incomes of students in higher education indicates that – relatively – they are much <a href="https://theconversation.com/south-africas-feesmustfall-protests-some-inconvenient-truths-67516">better off than the majority of South African youth</a>. Youth outside the further education system get little, if any, direct support from government. And so a large increase in funding for university students is not the best way to assist poor youth.</p>
<p><strong>What are the implications beyond education?</strong></p>
<p>There are two major implications.</p>
<p>Firstly, it increases the chances of a downgrade of the country’s debt that’s held in local currency. Even before these recent events I <a href="https://theconversation.com/latest-budget-underscores-desperate-state-of-south-africas-finances-86362">argued</a> this was almost inevitable. My view then was mainly informed by the revenue shortfalls indicated in the medium term budget, poor economic growth forecasts and the government abandoning its policy of fiscal consolidation (stabilising government debt).</p>
<p>The resignation of the head of the Treasury’s budget office makes the situation even more dire. The interference that induced it constitutes an unprecedented subversion of the country’s national budget process and National Treasury’s mandate to ensure stability and sustainability of public finances. </p>
<p>Secondly, the way in which the president intends to unilaterally ram through his favoured approach to higher education funding signals that a similar approach could be taken with a decision to pursue nuclear power. At the time of the medium-term budget, Finance Minister Malusi Gigaba <a href="https://www.fin24.com/Budget/gigaba-sa-cant-afford-nuclear-yet-20171025">indicated</a> that government cannot afford nuclear. But <a href="https://theconversation.com/zumas-allies-are-once-again-gung-ho-about-nuclear-will-they-get-their-way-87022">shortly afterwards</a> the new minister of energy, David Mahlobo, and Zuma both suggested that they are preparing to push it through. If that happened, it would further compromise South Africa’s public finances and economic growth.</p>
<p>There was some hope that a <a href="https://www.timeslive.co.za/sunday-times/business/2017-09-14-ramaphosa-leads-anc-leadership-race-analysts/">victory</a> in December for the anti-state capture grouping in the governing African National Congress’s elective conference might be able to stabilise governance and public finances. But it now appears that a great deal more damage could still be done by the president before then.</p><img src="https://counter.theconversation.com/content/87395/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Seán Mfundza Muller has received support from the Heinrich Boell Foundation to participate in parliamentary oversight processes relating to the 2017 medium-term budget policy statement, and is actively involved in providing technical support and advice to a number of civil society organisations on a range of public finance matters.</span></em></p>The imposition of the fee free higher education proposal on South Africa’s National Treasury without due consideration represents an escalation of the state capture led by President Jacob Zuma.Seán Mfundza Muller, Senior Lecturer in Economics, University of JohannesburgLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/732862017-02-21T08:40:21Z2017-02-21T08:40:21ZReplacing South Africa’s finance minister, or his deputy, would carry a heavy cost<figure><img src="https://images.theconversation.com/files/157660/original/image-20170221-18664-9zq029.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Finance minister Pravin Gordhan, his deputy Mcebisi Jonas, and Reserve Bank Governor Lesetja Kganyago. </span> <span class="attribution"><span class="source">GCIS</span></span></figcaption></figure><p>Many see <a href="http://mg.co.za/article/2017-02-17-brian-molefe-to-be-sworn-in-as-a-member-of-parliament">the decision</a> by South Africa’s governing African National Congress (ANC) to send the <a href="https://www.businesslive.co.za/fm/features/2016-11-03-state-of-capture-report-reduces-brian-molefe-to-tears/">disgraced</a> former CEO of the power utility Eskom to parliament as the precursor to another <a href="http://www.huffingtonpost.co.za/2017/02/17/brian-molefe-becomes-an-mp-next-stop-finance-minister/">attack</a> on the National Treasury and to remove finance minister Pravin Gordhan. </p>
<p>The decision to give Brian Molefe a seat in the country’s parliament has led to widespread <a href="https://www.dailymaverick.co.za/article/2017-02-20-life-of-brian-mexican-standoff-looms-for-zuma-of-guptas-new-cabinet-deployee/">speculation</a> that he is being positioned for a cabinet post – either as finance minister or as deputy finance minister. While some commentators believe that President Jacob Zuma has his sights set on appointing Molefe as finance <a href="http://www.timeslive.co.za/politics/2017/02/17/Molefe-as-MP-seen-as-a-bid-to-oust-finance-minister-Gordhan">minister</a>, others <a href="http://www.huffingtonpost.co.za/2017/02/17/whats-the-real-plan-for-brian-molefe/">argue</a> that the real target is Deputy Minister Mcebisi Jonas. The deputy minister <a href="http://www.fin24.com/Economy/mcebisi-jonas-takes-on-ajay-gupta-over-saxonwold-meeting-20170217">blew the whistle</a> on an alleged bribery attempt by a member of the Gupta family which is at the centre of a political storm amid allegations that it has attempted to exert undo influence on Zuma.</p>
<p>Either way, there is no doubt that Molefe’s appointment to either position would cause substantial turmoil in the country’s financial system and cost South Africa billions of rand. </p>
<h2>The cost of the rand taking a knock</h2>
<p>South Africa would take a massive economic blow because its currency would depreciate dramatically. The rand <a href="http://www.xe.com/currencycharts/?from=USD&to=ZAR">fell</a> through the floor the last time Zuma made a misbegotten attempt to <a href="https://theconversation.com/why-zumas-actions-point-to-shambolic-management-of-south-africas-economy-52174">install</a> one of his cronies at the helm of the National Treasury in December 2015.</p>
<p>This should worry South Africans. The country’s current account <a href="https://www.imf.org/external/pubs/ft/scr/2016/cr16218.pdf">deficit</a> in the third quarter of 2016 was 4.1%. This means that the sum of imports and external debt – borrowing from abroad – is larger than the sum of its exports and lending abroad. Mineral products, machinery and chemical products alone <a href="http://atlas.media.mit.edu/en/visualize/tree_map/hs92/import/zaf/all/show/2014/">constitute</a> more than 50% of South Africa’s imports. A weaker rand would make these more expensive since the country would have to pay more rand per dollar value. This means that prices for everything from consumer products to transportation would go up. South African firms, which often depend on intermediate inputs from abroad, would face a rise in the cost for their products and an erosion of their profits. As a consequence, fewer people would invest in the country.</p>
<p>A currency depreciation would affect investors in other ways too. A weaker rand would diminish their returns and they would therefore be more likely to look for investment opportunities elsewhere. Not only will they stop investing, they would also likely unwind their existing positions. This in turn would drain liquidity from the financial system, making banks less likely to provide new loans for businesses. The knock on effect would be lower growth and higher unemployment.</p>
<p>It is difficult to put a number on the impact of a sudden depreciation of the rand. But some simple back-of-the-envelope calculations can help. South Africa spends roughly US$10 billion more on imports than it gets from exports. This corresponds roughly to R130 billion per year. If the rand weakens from 13 to 14 Rand per US$1, the country would need another R10 billion to finance its trade imbalance. </p>
<p>South Africa has watched this movie before. Between November 2015 and January 2016 when Zuma installed the backbencher Des van Rooyen as finance minister the rand weakened from R14.4 to R16.9 per US$. This R2.5 increase per US$ corresponded to additional R25 billion cost to finance our trade deficit. On top of this <a href="http://www.biznews.com/undictated/2015/12/15/cost-to-sa-of-zuma-v-rooyen-gordhan-nene-r171bn/">private investors</a> are estimated to have lost R171 billion after finance minister Nhlanhla Nene <a href="http://ewn.co.za/2015/12/09/New-finance-minister-announced">was fired in 2015</a>.</p>
<h2>Secondary effects</h2>
<p>Removing either the finance minister or his deputy would also result in rating agencies downgrading the country’s investment rating to junk status. </p>
<p>Zuma has shown in the past that he has no clue about the impact of ratings on the country’s finances. Amidst threats of downgrade late last year Zuma was <a href="http://www.fin24.com/Economy/zuma-we-take-the-ratings-agencies-very-seriously-but-20161025">quoted</a> as saying:</p>
<blockquote>
<p>But although they’re important, their ratings don’t necessarily have an impact on the agreements and commissions South Africa have entered into with other countries.</p>
</blockquote>
<p>This simply is not true. A downgrade affects the interest rates on every new bond issuance. Every year some of our outstanding R2,000 billion <a href="https://commodity.com/debt-clock?off">domestic</a> and R141 billion foreign denominated debt has to be <a href="http://www.resbank.co.za/Lists/News%20and%20Publications/Attachments/7195/08Statistical%20tables%20%E2%80%93%20Public%20Finance.pdf">rolled over</a>. Debt services are already at roughly R150 billion per year – the second largest position in the country’s <a href="https://www.fanews.co.za/article/economy/43/budget-2016/1390/budget-2016-all-about-debt-stabilisation-and-a-social-compact/19856">budget</a>. A 5% increase in the country’s refinancing cost would already cost South Africa additional R7.5 billion every year. Money that is missing to finance social grants, healthcare, police or student bursaries.</p>
<p>The banking group Absa did some <a href="https://businesstech.co.za/news/finance/145453/fears-over-south-africa-junk-status-this-is-how-it-will-affect-you/">sample calculations</a> on how a ratings downgrade would affect the average South African. It concluded that every adult person would lose roughly R2,000 because a ratings downgrade would mean that the banks themselves would face higher refinancing costs. These would be passed on to their customers. </p>
<p>These numbers mirror a World Bank <a href="https://businesstech.co.za/news/finance/145453/fears-over-south-africa-junk-status-this-is-how-it-will-affect-you/">estimate</a> that a ratings downgrade in South Africa would result in a reduction of R1,000 per capita by the end of 2017.</p>
<p>The numbers paint a clear picture. Zuma’s last attack on the National Treasury cost South Africa <a href="http://www.biznews.com/undictated/2015/12/15/cost-to-sa-of-zuma-v-rooyen-gordhan-nene-r171bn/">billions</a>. Molefe’s appointment would be seen as another attack on the institution given that he was implicated by the former public protector Thuli Madonsela in her state capture <a href="http://mg.co.za/article/2016-11-02-breaking-read-the-full-state-capture-report/">report</a>. The effect of his appointment would be equally costly for the country. </p>
<p>South Africans should not allow this raid on the National Treasury to happen. The last time Zuma and his allies attempted to capture a well-functioning institution for their own personal gains the private sector gave them a hiding. The good news is that it is likely that markets will show a strong reaction this time, too. The question is whether ordinary South Africans realise the threat that a captured National Treasury would pose to their wallets and stand up before it is too late.</p><img src="https://counter.theconversation.com/content/73286/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Co-Pierre Georg is a Policy Associate at Economic Research Southern Africa. He writes in his private capacity.</span></em></p>The decision to give former Eskom CEO, Brian Molefe, a seat in the country’s parliament comes with the potential to cause great economic pain for South Africa.Co-Pierre Georg, Associate Professor, UCT School of Economics; South African Reserve Bank Research Chair in Financial Stability Studies, University of Cape TownLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/669532016-10-12T16:42:14Z2016-10-12T16:42:14ZWhy South Africa faces a train smash if its finance minister is removed<figure><img src="https://images.theconversation.com/files/141489/original/image-20161012-13485-1pqeqd2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">South Africa's Finance Minister Pravin Gordhan before delivering his 2016 budget address to parliament in February. Will he deliver another?</span> <span class="attribution"><span class="source">Reuters/Mike Hutchings</span></span></figcaption></figure><p>The relatively trivial nature of the <a href="http://ewn.co.za/2016/10/11/Finance-Ministry-Hawks-taking-calculated-steps-to-maximise-damage-on-economy">charges</a> against South Africa’s Finance Minister Pravin Gordhan, and the way in which the prosecution has been pursued, leads to the conclusion that this is a trumped up charge. It also suggests that Gordhan is being prosecuted for <a href="http://city-press.news24.com/News/charges-against-pravin-gordhan-are-nothing-but-a-personal-war-in-politics-20161011">reasons unrelated</a> to the law and order mandate of the body that has laid the charge, the <a href="https://www.npa.gov.za/node/8">National Prosecution Authority</a>. </p>
<p>It is shockingly obvious that the only way to explain the charge against Gordhan and his two co-accused and the manner of its serving is <a href="http://www.dailymaverick.co.za/article/2016-10-11-sars-wars-the-scope-creep-of-a-malicious-prosecution-same-case-different-charges/#.V_5d6uh97IU">malicious intent</a>. The charges are widely viewed as an attempt to remove Gordhan from office without formally firing him, or to justify doing so soon.</p>
<p>These developments bode ill for South Africa. Because of the nature of events, including the circumstances of the <a href="http://mg.co.za/article/2015-12-09-nhlanhla-nene-removed-as-finance-minister">firing</a> of Minister Nhlanhla Nene in December 2015, all reasonable observers will expect the quality of financial management to deteriorate in a post-Gordhan scenario. They will expect that the reason for Gordhan’s removal is to loosen controls over the country’s National Treasury.</p>
<p>The expectation of most will be that the budget deficit will rise, unaffordable projects will be supported for bad reasons, state-owned enterprises that are under incompetent management will get more bailouts, guarantees, or capital injections, and government finances will quickly deteriorate. Ratings will fall, funds will leave South Africa and the rand will grow even weaker. South Africans with assets will seek to move them abroad, and younger South Africans with marketable skills will look for jobs in countries with better prospects, including many in Africa. </p>
<p>Simply put: it will be a train smash.</p>
<p>But how did it get to this? What lies behind this latest attack on the finance minister?</p>
<h2>Gordhan’s record</h2>
<p>Gorhan has served two stints as finance minister – from 2009 to 2014, and then again when he was asked by President Jacob Zuma to return to the job in December last year <a href="http://www.sabc.co.za/news/a/7b4733804dade5ddaee8ffcfeb4bc468/Zuma-defends-decision-of-appointing-Des-van-Rooyan-20160730">after abandoning the disastrous appointment of Des van Rooyen</a>. </p>
<p>When he first assumed office in May 2009 he faced the very difficult task of helping to lead South Africa out of a recession brought on, in part, by the global financial crisis. However, the constraints on him were not excessively severe at the time.</p>
<p>The financial circumstances were strong. South Africa had run a budget <a href="http://www.treasury.gov.za/documents/nationalbudget/2008/review/chap3.pdf">surplus</a> for two years in the financial years ending 2007 and 2008.</p>
<p>There were several reasons for the surpluses. One was that far better tax collection and management systems were developed by Gordhan and his team from the time of his appointment as deputy commissioner of the South African Revenue Services in 1998. Not only were the systems better, but the budgeting and spending policies and practices of then Minister of Finance, Trevor Manuel, gave South African taxpayers the confidence that their payments would be reasonably well used. </p>
<p>Moreover, growth and profit rates were higher than expected in the middle years of the 2000s. Manuel’s Treasury steadily brought down the debt owed by Treasury to the relatively low level of <a href="http://www.tradingeconomics.com/south-africa/government-debt-to-gdp">28% of GDP in 2008</a>. </p>
<p>In addition, South Africa’s banking system survived the global financial crisis better than many, partly due to good supervision by the Reserve Bank and the Treasury and partly due to the relatively good margins, by global standards, they earned.</p>
<p>Strong finances meant that bold expansionary policies were possible in 2009 to countervail the crisis. South Africa confidently <a href="http://www.treasury.gov.za/documents/national%20budget/2011/review/Budget%20Review.pdf">swung</a> from a small budget surplus of 1.7% in 2008 to a small deficit of 1.1% in 2009 and a very large budget deficit of 6.6% in 2010.</p>
<p>The expectation remained that the global economic crisis was of limited duration and that South Africa’s economy would turn around when the rest of the world did. These expectations continued for several years and consecutive budget deficits of well over the unwritten guideline of 3% followed each other without great concern.</p>
<h2>Fiscal consolidation begins to bite</h2>
<p>Gordhan and the Treasury had a cushion of low debt in his first term as finance minister in 2009. However, in spite of prudent policies under his successor, Finance Minister Nhlanhla Nene, by 2016 government debt had risen to levels that had the ratings agencies doing their sums. Was it going to be greater than 50% of GDP? How much greater than 50% and for how long? 50% had become the red-line for budget deficits since the 1990s. </p>
<p>The latest budget review is forecasting gross government loan debt to GDP at 50.9% for the 2016-17 financial year.</p>
<p>As a responsible government leader, Gordhan was obliged to continue down the fiscal consolidation path along which Minister Nene resolutely marched. Fiscal consolidation means saying no more often. No to spending more, and no to guarantees being issued to spendthrift state-owned entities. </p>
<p>Gordhan had other pressures to contend with too. During his first term as finance minister the economy grew by 2.5% to 3.5%. This was lower than in the middle years of the 2000s when South Africa grew at an average of 5.5% per year. Although not optimal, the situation was still manageable. Suddenly in 2015 the expectation fell to between 1% and 2% growth. </p>
<p>Then in 2016, the question was: would South Africa grow at all, and if it did, would growth be closer to 1% or to 0?</p>
<p>This massive deterioration in South Africa’s expectations derives from several factors. Firstly, in my view, the South Africa’s recession in 2009 was far worse and more damaging than many thought. Because the banks didn’t fail, some were sanguine, despite the fact that the country lost 8% of all jobs – more than a million of them. </p>
<p>South Africa’s crisis was particularly bad because it was hit by a double whammy. Like many developed countries, it suffered a consumer credit crunch – households were badly over-borrowed and had to cut back sharply when economic conditions tightened. And like many developing countries South Africa also suffered an export price and volume crunch – the prices and levels of demand for South Africa’s main exports fell sharply as slower growth affected economies around the world. </p>
<p>Secondly, levels of confidence fell to record low levels. <a href="http://www.bdlive.co.za/markets/2016/10/05/business-confidence-index-hits-a-31-year-low">One index</a> fell to levels not seen since 1985. That was the year in which then Prime Minister PW Botha delivered what became known as his <a href="http://www.sahistory.org.za/dated-event/pw-botha-gives-rubicon-speech-durban">“Rubicon speech”</a> that gutted business confidence and was to lead to his, and apartheid’s, downfall. </p>
<p>Similarly, 2016 has been a year of hopelessly flailing political leadership. South Africa’s economic growth performance has <a href="https://www.wider.unu.edu/publication/policy-co-ordination-and-growth-traps-middle-income-country-setting">been much weaker</a> than of many of its peers as well as many other developing countries. For example, while Africa’s performance has deteriorated, South Africa’s has got worse, quicker.</p>
<p>Unless the malicious prosecution is halted, South Africa’s economic performance will continue to be far poorer than it needs to be. Average per capita incomes may continue to decline in real terms for South Africans, <a href="https://www.resbank.co.za/Publications/Detail-Item-View/Pages/Publications.aspx?sarbweb=3b6aa07d-92ab-441f-b7bf-bb7dfb1bedb4&sarblist=21b5222e-7125-4e55-bb65-56fd3333371e&sarbitem=7470">as they have since last year</a>. This will affect the poor most severely.</p><img src="https://counter.theconversation.com/content/66953/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alan Hirsch is director of the Graduate School of Development Policy and Practice which has received funds from the South African government for training public officials.</span></em></p>What lies behind the decision to criminally charge South Africa’s finance minister?Alan Hirsch, Professor and Director of the Graduate School of Development Policy, University of Cape TownLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/647042016-09-01T15:35:51Z2016-09-01T15:35:51ZWhy patronage and state capture spell trouble for South Africa<figure><img src="https://images.theconversation.com/files/136292/original/image-20160901-1048-1i4gi2v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">South Africa's deputy president Cyril Ramaphosa (L) and President Jacob Zuma. Ramaphosa has described the ANC government as being at war with itself.</span> <span class="attribution"><span class="source">EPA/Mike Hutchings</span></span></figcaption></figure><p>South Africa has caught the world’s attention with an epic battle between two powerful factions within the governing African National Congress (ANC) which has spilt into government. Cyril Ramaphosa, deputy president of the country, has aptly <a href="http://city-press.news24.com/News/ramaphosa-supports-gordhan-warns-against-state-at-war-with-itself-20160825">described</a> this as a government that wages “war with itself”. </p>
<p>On the one side there is the largely rural based faction of <a href="http://www.bdlive.co.za/opinion/columnists/2016/08/31/anc-unity-deal-will-keep-patronage-faction-at-the-table">patronage politicians</a> around President Jacob Zuma. The other side is less well defined, but it can be safely assumed that the <a href="http://city-press.news24.com/Voices/gordhan-under-siege-20160828">beleaguered</a> finance minister Pravin Gordhan is among them. What makes this battle different from the usual political quarrels is the viciousness with which the patronage politicians are fighting to get the upper hand. </p>
<p>The World Bank’s Joel Hellman has <a href="http://www.imf.org/external/pubs/ft/fandd/2001/09/hellman.htm">defined</a> state capture as</p>
<blockquote>
<p>the efforts of firms to shape the laws, policies, and regulations of the state to their own advantage by providing illicit private gains to public officials.</p>
</blockquote>
<p>In South Africa, obtaining government <a href="http://www.gov.za/tenderpreneurship-stuff-crooked-cadres-fighters">tenders</a> should be added to the channels through which unscrupulous firms and individuals can benefit from state capture. </p>
<p>It is necessary to understand the system of patronage politics and the state capture that fuels it to understand why replacing Gordhan is so important to Zuma. So important, that Zuma is willing to risk the <a href="https://www.enca.com/south-africa/pityana-zuma-entire-leadership-of-the-anc-must-resign">unity</a> of his party and <a href="http://www.thesouthafrican.com/downgrade-junk-status-possibility-sa-according-poll/">losing</a> South Africa’s investment grade sovereign debt rating, which would have devastating effects on the economy and the budget.</p>
<p>The South African captors are <a href="http://www.iol.co.za/news/politics/maimane-presses-madonsela-on-gupta-probe-2062093">reported</a> to be the wealthy Gupta family. Their capture of the government is so deep that they even dared to <a href="http://mg.co.za/article/2016-03-16-guptas-offered-me-finance-minister-position-mcebisi-jonas">offer</a> finance minister <a href="https://theconversation.com/the-removal-of-south-africas-finance-minister-is-bad-news-for-the-country-52170">Nhlanhla Nene’s</a> job to his deputy, Mcebisi Jonas.</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/136295/original/image-20160901-1039-1x009gs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/136295/original/image-20160901-1039-1x009gs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=440&fit=crop&dpr=1 600w, https://images.theconversation.com/files/136295/original/image-20160901-1039-1x009gs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=440&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/136295/original/image-20160901-1039-1x009gs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=440&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/136295/original/image-20160901-1039-1x009gs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=553&fit=crop&dpr=1 754w, https://images.theconversation.com/files/136295/original/image-20160901-1039-1x009gs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=553&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/136295/original/image-20160901-1039-1x009gs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=553&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">South African finance minister Pravin Gordhan and his deputy Mcebisi Jonas.</span>
</figcaption>
</figure>
<p>The money provided by the Guptas fuels the patronage machinery that Zuma and his <a href="http://www.financialmail.co.za/opinion/bruceslist/2016/08/24/bruce-s-list-zuma-gets-ready-to-rumble">cronies</a> use to fight for dominance in the ANC. The family has <a href="http://www.enca.com/south-africa/gupta-family-just-caught-south-africa%E2%80%99s-political-crossfire">denied</a> the allegations against it.</p>
<p>South Africa has reached a critical point. If the patronage politicians win the battle within the ANC and complete the capture of the state the country will slip from stagnation into the abyss.</p>
<h2>Institutions that have been compromised</h2>
<p>As part of their fight for dominance, patronage politicians have attacked the freedom of press as well as the rule of law. </p>
<p>Hlaudi Motsoeneng, chief operating officer of the SABC, turned the public broadcaster into a propaganda machine by <a href="http://mg.co.za/article/2016-07-18-you-can-question-anyone-except-zuma-hlaudi-reportedly-told-sabc-journalists">telling</a> its journalists “do not focus on negative stories”. The resulting <a href="http://www.msn.com/en-za/news/indepth/sabc-mess-now-in-parliaments-care-dont-hold-your-breath/ar-BBulrtO?li=AA520r">mess</a> at the SABC even triggered scathing <a href="http://www.dailymaverick.co.za/article/2016-07-05-anc-finally-wakes-up-to-rot-at-sabc/#.V8f_G5N95E4">criticism</a> from some within the ANC’s top leadership. </p>
<p>Institutions that guarantee the rule of law have suffered severely. The reputation of the National Prosecuting Authority, for example, has been <a href="http://mg.co.za/article/2016-05-23-shaun-abrahams-shreds-the-npas-reputation">shredded</a> by its decision to appeal a high court ruling to <a href="https://www.theguardian.com/world/2009/jan/13/jacob-zuma-corruption-charges-appeal">reinstate</a> the 783 corruption charges against President Zuma. </p>
<p>The charges were <a href="http://www.telegraph.co.uk/news/worldnews/africaandindianocean/southafrica/5114220/Jacob-Zuma-charges-dropped.html">dropped</a> in suspicious circumstances in 2009. This paved the way for Zuma to become president. </p>
<p>Similarly, the Directorate for Priority Crime, <a href="http://www.saps.gov.za/dpci/index.php">(known as the Hawks)</a>, has been used to create a narrative that would allow Zuma to replace Gordhan with someone from the patronage camp. University of Cape Town legal expert Cathleen Powell <a href="https://theconversation.com/south-africas-finance-minister-is-vindicating-the-law-by-ignoring-police-unit-64535">argues</a> that the Hawks’ continuing attacks on Gordhan are “not only nonsensical, but are obviously nonsensical.” The Hawks, she says, are behaving in a way that “is blatantly outside their powers under law.”</p>
<p>This week, a new front has been opened against an institution most would have believed was beyond the reach of the patronage politicians. First, ANC Deputy Secretary-General Jessie Duarte <a href="http://www.biznews.com/undictated/2016/09/01/sarb-attack-shows-zuma-now-wants-control-over-everything-including-banks/?utm_medium=Social&utm_campaign=Echobox&utm_source=Twitter&utm_term=Autofeed">questioned</a> the independence of the Reserve Bank saying that its private ownership posed a “difficulty”. Then, Mineral Resources Minister Mosebenzi Zwane <a href="http://www.dailymaverick.co.za/article/2016-08-31-minister-zwane-wanted-sa-reserve-bank-role-changed-after-gupta-blacklisting-report/?utm_source=Daily+Maverick+First+Thing&utm_campaign=d307ff125e-First_Thing_1+September&utm_medium=email&utm_term=0_c81900545f-d307ff125e-128215025#.V8fGxJN95E4">suggested</a> to cabinet that the right to grant banking licenses be moved from the Reserve Bank to the National Treasury. The National Treasury has been a key <a href="http://www.fin24.com/BizNews/named-van-rooyens-two-gupta-advisors-who-almost-hijacked-sa-treasury-20160215">target for capture</a> because it controls the government purse.</p>
<p>From an economic perspective, the comments by Duarte and Zwane are obvious nonsense. The Reserve Bank’s independence is <a href="http://www.resbank.co.za/Lists/News%20and%20Publications/Attachments/7449/Statement%20on%20recent%20comments%20by%20the%20ANC's%20Deputy%20Secretary%20General.pdf">enshrined in the constitution</a>. And the bank has been <a href="http://citizen.co.za/904541/the-sarb-steady-as-a-rock/">lauded</a> for its independence, for maintaining price stability and for ensuring the health of the banking sector. </p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/136294/original/image-20160901-1048-bac1wj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/136294/original/image-20160901-1048-bac1wj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/136294/original/image-20160901-1048-bac1wj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/136294/original/image-20160901-1048-bac1wj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/136294/original/image-20160901-1048-bac1wj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/136294/original/image-20160901-1048-bac1wj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/136294/original/image-20160901-1048-bac1wj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">ANC deputy secretary general Jessie
Duarte.</span>
</figcaption>
</figure>
<p>To suggest, as Zwane has, that National Treasury should conduct banking supervision is contrary to international best practices and would only weaken banking supervision in the country. Through the foolishness of their suggestions Duarte and Zwane reveal their true colours. Zwane has been <a href="http://www.timeslive.co.za/sundaytimes/stnews/2016/05/01/Gupta-minister-on-mission-impossible">linked</a> to the Guptas since his appointment as minerals and energy minister while Duarte’s <a href="http://www.iol.co.za/business/news/duarte-didnt-get-son-in-law-a-job-1985618">son-in-law</a> has been linked to the family.</p>
<p>The economic consequences of state capture are devastating for the economy. South Africa’s dysfunctional state owned enterprises, from South African Airways to the national power utility Eskom, are weighing heavily on the economy. In a recent <a href="https://www.imf.org/en/News/Articles/2016/07/11/13/25/PR16322-South-Africa-IMF-Executive-Board-Concludes-2016-Article-IV-Consultation">evaluation</a> the IMF emphasised the need for South Africa “to improve SOE performance and strengthen their governance.” </p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/136296/original/image-20160901-1012-kttx12.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/136296/original/image-20160901-1012-kttx12.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=409&fit=crop&dpr=1 600w, https://images.theconversation.com/files/136296/original/image-20160901-1012-kttx12.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=409&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/136296/original/image-20160901-1012-kttx12.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=409&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/136296/original/image-20160901-1012-kttx12.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=514&fit=crop&dpr=1 754w, https://images.theconversation.com/files/136296/original/image-20160901-1012-kttx12.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=514&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/136296/original/image-20160901-1012-kttx12.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=514&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">South Africa’s mining minister Mosebenzi Zwane.</span>
<span class="attribution"><span class="source">Mike Hutchings/Reuters</span></span>
</figcaption>
</figure>
<p>The parlous state of the state owned enterprises was amplified this week when Futuregrowth, Africa’s biggest private fixed-income manager, <a href="http://www.bdlive.co.za/business/financial/2016/08/31/futuregrowth-will-stop-lending-to-six-state-owned-firms-including-eskom">announced</a> that it would no longer be lending money to any of them, including Eskom. </p>
<p>Losing the confidence of Futuregrowth and other institutional investors will significantly exacerbate the country’s economic woes. South Africa will not only lose access to much needed funding for infrastructure projects. It will also increase its chances of being alienating international investors as well as rating agencies. </p>
<p>This is something it can ill afford given its large and persistent <a href="http://www.bloomberg.com/news/articles/2016-03-08/south-africa-current-account-gap-widens-to-5-1-as-exports-drop">current account deficit</a>. Without investment, and without its current sovereign rating, the country’s currency will plummet even further, exacerbating inflationary pressures.</p>
<p>There is, unfortunately, no quick fix to the current crisis. The only way of getting rid of patronage politicians is through a political process. A government needs checks and balances from a strong civil society. The ANC, it seems, has not understood the warning <a href="http://www.bbc.com/news/world-africa-37161530">voters sent</a> during the last municipal election. Let’s hope it will understand the warning international investors are sending before the damage to the economy becomes irreversible.</p><img src="https://counter.theconversation.com/content/64704/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Co-Pierre Georg receives funding from the Volkswagen Foundation to study the spillovers of quantitative easing in industrialized countries on emerging markets. He consults to the South African Reserve Bank. He is affiliated with Economic Research Southern Africa, a non-partisan think tank that is funded by the National Treasury. He writes in his private capacity.</span></em></p>South Africa has reached a critical point. If patronage politicians win the battle within the ruling ANC and complete the capture of the state, the country will slip from stagnation into the abyss.Co-Pierre Georg, Senior Lecturer, African Institute for Financial Markets and Risk Management and Director, UCT Financial Innovation Lab, University of Cape TownLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/644412016-08-25T08:28:20Z2016-08-25T08:28:20ZSouth African academics ask Zuma to ‘stop the war’ on finance minister<figure><img src="https://images.theconversation.com/files/135476/original/image-20160825-6595-1v9vudw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">South Africa's Finance Minister Pravin Gordhan is a hunted man.</span> <span class="attribution"><span class="source">Mujahid Safodien/EPA</span></span></figcaption></figure><p><em>South Africa’s minister of finance Pravin Gordhan is again on <a href="http://www.dailymaverick.co.za/article/2016-08-24-statement-by-minister-of-finance-pravin-gordhan/#.V76eh5h9600">a collision</a> course with the country’s Directorate for Priority Crime Investigations. The row has <a href="http://www.news24.com/SouthAfrica/News/live-pravin-gordhan-the-latest-news-20160825">unsettled</a> the country’s already shaky currency, the rand. It’s also prompted a group of senior academics from nine universities to pen an <a href="http://www.rdm.co.za/business/2016/08/24/stop-the-war-on-pravin-gordhan">open letter</a>. The letter, which first appeared on local news site the <a href="http://www.rdm.co.za/">Rand Daily Mail</a>, is republished below.</em></p>
<p>“In December 2015 the shocking decision by President Jacob Zuma to <a href="http://nenegate.biznews.com/">fire</a> Finance Minister Nhlanhla Nene led about 70 senior academic economists from across South African universities to write an <a href="https://theconversation.com/academics-in-south-africa-voice-their-dismay-at-zumas-actions-52313">open letter</a> to the Business Day to express our outrage at the capriciousness of that decision. We also warned of the likely consequences for the country’s fragile economy. </p>
<p>That that decision was politically motivated has been borne out by subsequent events. Significantly, Mr Nene’s <a href="http://www.bdlive.co.za/national/2016/04/13/nenes-brics-job-still-a-mystery">redeployment</a> to the Brics Bank, ostensibly the reason for his removal, has not materialised. The President continues to use every platform to <a href="http://www.bdlive.co.za/national/2016/02/22/zuma-says-van-rooyen-was-administrations-most-qualified-finance-minister">sing the praises</a> of the little known backbencher he appointed in Nene’s place. He also frequently expresses bitterness at the role of (so called) white monopoly capitalists whom he claims forced a <a href="http://www.bdlive.co.za/national/2015/12/13/zuma-brings-back-gordhan-drops-van-rooyen">reversal</a> of his decision to appoint Desmond van Rooyen.</p>
<p>At the time and in the circumstances, some commentators thought that the new Minister Pravin Gordhan would be safe from similar politically motivated attacks. How wrong they were. Since earlier this year, Minister Gordhan has been subjected to an unrelenting attack from the Hawks. They have been investigating the Minister’s alleged role in the establishment of the so-called "rogue” spy unit when he was the South African Revenue Services’ (SARS) Commissioner. A few days ago the Daily Maverick <a href="http://www.dailymaverick.co.za/article/2016-08-23-breaking-sars-wars-endgame-hawks-order-pravin-gordhan-and-others-to-present-themselves/">reported</a> that the Hawks were “circling” the Minister again.</p>
<p>These events have once again compelled us to put pen to paper to express our outrage and warn of the dangers to our still very fragile economy. There are predictions of <a href="https://theconversation.com/south-africa-can-expect-zero-growth-its-problems-are-largely-homemade-62943">zero growth</a> in 2016; stubbornly <a href="http://ewn.co.za/2016/05/09/SA-unemployment-rate-rises">high unemployment</a>; persistent poverty and inequality and a volatile currency. This is not the time – if there ever was – to be playing such dangerous games with the lives and well-being of all sectors of our economy and society, especially the poor and the vulnerable. </p>
<p>We say all this with the same qualifiers we employed in our <a href="https://theconversation.com/academics-in-south-africa-voice-their-dismay-at-zumas-actions-52313">December 2015 letter</a>. These include our recognition that Ministers of Finance do not enjoy any special privileges or protection. Everyone is subject to the rule of law and the <a href="http://www.justice.gov.za/legislation/constitution/SAConstitution-web-eng.pdf">Constitution</a>. Finally, our stance does not mean that all of us share with equal enthusiasm the Treasury and government’s fiscal framework.</p>
<p>We urge the President, the Cabinet and the African National Congress’ National Executive Committee (NEC) to assist in bringing this dangerous set of events to an end in the best way possible in the interests of our country and our economy. It is time for real leaders in the NEC, the Cabinet and in governing alliance partners the SA Communist Party and the Congress of South African Trade Unions to stand up to the tyrannical and despotic behaviour on display here. Yet again we stand on the edge of an economic precipice.</p>
<p>We end expressing by similar sentiments to those used in our December 2015 letter: As senior academics in Economics and related disciplines we express our unambiguous and urgent concern both about these events in general, about the unseemly attacks on the Minister of Finance and about the general lack of progress in tackling the massive and growing crisis of low growth, poverty, unemployment and inequality as well as the crisis of governance at our state owned enterprises.“</p>
<p>Collectively supported by:</p>
<p><strong>University of Cape Town</strong></p>
<p>Professor Haroon Bhorat, Professor Anthony Black, Professor Faizel Ismail, Professor Murray Leibbrandt, Professor Martin Wittenberg, Professor Ingrid Woolard, Professor Alan Hirsh, Professor Cally Ardington, Professor Christopher Rooney, Dr Co-Pierre Georg, Professor David Kaplan, Professor Don Ross, Mr Grant Smith, Ms Katherine Eyal, Ms Kezia Lilenstein, Professor Lawrence Edwards, Associate Professor Malcolm Keswell, Associate Professor Mark Ellyne, Professor Martine Visser, Professor Mike Morris, Mr Morne Oosthuizen, Professor Nicoli Nattrass, Associate Professor Tony Leiman, Toughedah Jacobs, Sarah Marriott, Adaiah Lilenstein, Jabulile Monnakgotla, Amy Thornton, Shakira Jeppie, Associate Professor Justine Burns</p>
<p><strong>University of Pretoria</strong></p>
<p>Professor Steve Koch, Professor Elsabe Loots, Professor Riel Franzsen, Professor James Blignaut, Professor Jan van Heerden</p>
<p><strong>Sol Plaatje University</strong></p>
<p>Botho Enele and Mandla Mthembu</p>
<p><strong>Rhodes University</strong></p>
<p>Professor Robert van Niekerk</p>
<p><strong>North West University</strong></p>
<p>Wilma Viviers</p>
<p><strong>University of Stellenbosch</strong></p>
<p>Servaas van der Berg, Stan du Plessis, Rulof P Burger, Nick Vink, Theo Kleynhans, Professor Andrie Schoombee, Professor Estian Calitz, Professor Ada Jansen, Professor Johan Fourie, Professor Ben Smit, Professor Ronelle Burger, Professor Johann Kirsten</p>
<p><strong>University of the Western Cape</strong></p>
<p>Julian May</p>
<p><strong>University of Witwatersrand</strong></p>
<p>Professor Imraan Valodia, Professor Vishnu Padayachee, Dr Gareth Roberts, Fatima Bhoola, David Francis, Associate Professor Daniela Casale, Professor Dori Posel, Lumkile Mondi, Nimisha Naik, Associate Professor Uma Kollamparambil, Kenneth Creamer</p>
<p><strong>Private Sector</strong></p>
<p>Iraj Abedian – Chief Economist, Pan-African Investment & Research Services</p><img src="https://counter.theconversation.com/content/64441/count.gif" alt="The Conversation" width="1" height="1" />
A row between South Africa’s finance minister and the country’s Directorate for Priority Crime Investigations has prompted academics to pen an open letter asking President Jacob Zuma to intervene.Natasha Joseph, Commissioning EditorLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/553982016-02-25T13:50:54Z2016-02-25T13:50:54ZSouth Africa’s budget hits right notes but won’t stave off downgrade<figure><img src="https://images.theconversation.com/files/112937/original/image-20160225-15156-9n7g9b.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Finance minister Pravin Gordhan's budget speech has put the ANC government's plan to fight poverty and reduce inequality back in the spotlight.</span> <span class="attribution"><span class="source">Reuters/Siphiwe Sibeko</span></span></figcaption></figure><p>In times of crisis budget speeches are usually a lugubrious affair. The <a href="http://www.treasury.gov.za/documents/national%20budget/2016/speech/speech.pdf">first</a> by finance minister Pravin Gordhan since his <a href="https://theconversation.com/zumas-about-turn-shows-power-of-the-south-african-media-and-the-markets-52315">return to the post</a> is somewhat cheerful. </p>
<p>He did well to highlight the tough economic times we are in, but did not compound the gloom with big announcements of structural reforms. Yet it is necessary to take the pain now, and have gratification later.</p>
<h2>Lacking presidential support</h2>
<p>With the 2016 local government elections a <a href="http://www.enca.com/coverage/2016-municipal-elections">few months away</a>, it was going to be very hard for Gordhan to announce deep and sweeping cuts, except those that are on the margins. While the budget was positive, it will be insufficient to stave off a possible sub-investment downgrade. There is no sensible political strategy that anchors the budget.</p>
<p>In any case, to drive bold economic reforms, Gordhan would need President Jacob Zuma’s undivided support. Signs suggest that he does not have such support. A few days before Gordhan gave his budget, Zuma muddied the waters by <a href="http://mg.co.za/article/2016-02-22-van-rooyen-was-most-qualified-for-finance-minister-job-zuma">suggesting</a> that his dubious appointment of Des van Rooyen to replace <a href="https://theconversation.com/why-zumas-actions-point-to-shambolic-management-of-south-africas-economy-52174">Nhlanhla Nene</a> in the finance post in December was a stroke of genius. Clearly unrepentant, he said:</p>
<blockquote>
<p>You know van Rooyen is my comrade, <a href="http://www.sahistory.org.za/topic/umkhonto-wesizwe-mk">MK </a> for that matter. He is a trained finance and economic comrade and more qualified than any minister I have ever appointed, in the finance issue.</p>
</blockquote>
<p>Zuma’s remarks were not just disrespectful to Gordhan, especially on the eve of the budget, but showed the extent to which the president is disconnected from the country’s economic realities.</p>
<h2>Cost cutting superficial</h2>
<p>Beyond cost cutting measures, including on personnel expenditure and freezing of posts, the substance of reforms was trifling. There was no actionable commitments set out against which government can be held to account.</p>
<p>On big-ticket items such as, for example, reducing the size of government which comprises 73 cabinet members (35 ministers, and 38 deputy ministers), plus the president and his deputy, Gordhan was timid. Even though this is not his call to make, he occupies a powerful position to signal his view on how to go about overhauling the public service. Yet such massive restructuring of government would lay an important basis for building a new social pact and build trust with a sceptical public that sees government as a trough for cronies. </p>
<h2>Policy uncertainty</h2>
<p>There are a number of elements that were set out in the budget vote, and which have a bearing on politics and institutions.</p>
<p>The first is policy uncertainty. Gordhan did well by emphasising this issue as a contributor to the dismal performance of South Africa’s economy. In the past, government has been hiding behind the global economic headwinds, including troubles in emerging markets, without admitting that its own policy stance and poor leadership have weighed heavily on the country’s economic performance.</p>
<p>Gordhan’s answer is to put the four-year-old <a href="http://www.gov.za/issues/national-development-plan-2030">National Development Plan</a>, the ANC government’s plan to fight poverty and reduce inequality, back in the spotlight. He made the point that it is what guides the budget. It needs retooling if it is to be a credible programme for policy implementation. A clear and concise action plan with measurable outcomes is what is needed to drive change. </p>
<h2>Investing in growth and education</h2>
<p>The second aspect has to do with infrastructure investment, both hard and soft. Maintaining infrastructure investment is critical during times of low growth. There is growing consensus globally that fiscal consolidation should be balanced with sustained investment in infrastructure. An innovative approach to achieving some of the targeted outcomes will entail drawing upon the resources and expertise of the private sector. In some instances this would be through private-public partnerships. The approach, if used well, could ease burden on the fiscus.</p>
<p>Even with respect of the programmes of state-owned enterprises (SOEs), co-financing with the private sector will help to spread risk and bring about efficiencies. But there are areas where privatisation is necessary, such as the announced partial privatisation of <a href="http://www.news24.com/Travel/Flights/SAA-leadership-rocked-by-scandal-again-20140521">South African Airways</a> after rationalisation with <a href="http://www.bdlive.co.za/business/transport/2014/09/30/south-african-express-airways-in-extremely-difficult-financial-position">SA Express</a>.</p>
<p>On infrastructure broadly, Gordhan highlighted hard infrastructure areas such as energy; transport logistics and infrastructure; as well as social infrastructure in regards to housing; health facilities; and education. These are critical enablers of growth, and are components of the R870 billion public sector infrastructure budget over the next three years. Again, this cannot substitute for long-term investment by the private sector in order to expand economic activity.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/112952/original/image-20160225-15179-1cwvrrv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/112952/original/image-20160225-15179-1cwvrrv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=421&fit=crop&dpr=1 600w, https://images.theconversation.com/files/112952/original/image-20160225-15179-1cwvrrv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=421&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/112952/original/image-20160225-15179-1cwvrrv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=421&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/112952/original/image-20160225-15179-1cwvrrv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=529&fit=crop&dpr=1 754w, https://images.theconversation.com/files/112952/original/image-20160225-15179-1cwvrrv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=529&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/112952/original/image-20160225-15179-1cwvrrv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=529&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Finance minister Pravin Gordhan delivering his 2016 budget speech.</span>
<span class="attribution"><span class="source">Reuters/Mike Hutchings</span></span>
</figcaption>
</figure>
<p>Measures that Gordhan announced, such as creating a one-stop shop, otherwise known as Invest SA, to support investors look good on the surface. Successful one-stop shops are underpinned by transparent policies built on the idea that a country is open for business, entrepreneurs are supported, and that government champions foreign investment.</p>
<p>The third politically potent area is that of education. Again here Gordhan deserves accolades for injecting more resources into higher education. He allocated R16 billion over the next three years, funded through re-prioritisation and allocations.</p>
<p>But, South Africa’s higher education sector would require significant resourcing for the foreseeable future, if we are to avoid more <a href="https://theconversation.com/africa/topics/university-fees">protests over fees</a> and avert a decline in the quality of infrastructure, educational resources, and programmes.</p>
<h2>Fixing public enterprises</h2>
<p>Finally, Gordhan touched on the vexed issue of state owned enterprises (SOEs). He highlighted the challenges that this sector faces, including governance, financial management, and operational inefficiencies. The recent problems uncovered by the <a href="http://www.corruptionwatch.org.za/madonsela-lifts-lid-on-post-office-fraud/">Public Protector</a> at the South African Post Office, at the heart of which are financial mismanagement, dodgy procurement practices and poor leadership are emblematic of the condition of key SOEs in the country.</p>
<p>Gordhan reinforced the Presidential Committee on <a href="http://www.thepresidency.gov.za/electronicreport/downloads/volume_1/volume_1.pdf">SOE Report</a>, referring to it as “the recently released report”. Chaired by <a href="http://whoswho.co.za/mangwashi-phiyega-24877">Riah Phiyega</a>, this committee released its report in May 2013. There have been a number of developments since, which did not take into account the report’s recommendations. These developments include corporate governance failures and intimations of political interference at Eskom; and the re-assignment of the South African Airways from the political oversight of the Department of Public Enterprise to the National Treasury.</p>
<p>The Phiyega report cited by Gordhan is convoluted and with no precise action plan.</p>
<p>No doubt, Gordhan has a clear grasp of what is required to reignite growth in the economy, but politics constrains him from undertaking bold economic reforms. He lacks the support of his president. There may be relief for now from austerity measures, but his measures are hardly sufficient to avert sub-investment downgrade in the months to come. That will be the tipping point for real change in our institutions, politics and economy.</p><img src="https://counter.theconversation.com/content/55398/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mzukisi Qobo does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Finance minister Pravin Gordhan would need President Zuma’s undivided support to drive bold economic reforms. But, signs suggest that he does not have such support and is undermined by the president.Mzukisi Qobo, Associate Professor at the Pan African Institute, University of JohannesburgLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/544432016-02-10T15:20:29Z2016-02-10T15:20:29ZDoes President Zuma have the courage to do the right thing?<figure><img src="https://images.theconversation.com/files/110971/original/image-20160210-12137-1xlt9u5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">South Africa's Jacob Zuma is president of the country as well as the African National Congress. He is under pressure on all fronts.</span> <span class="attribution"><span class="source">Reuters/Siphiwe Sibeko </span></span></figcaption></figure><p>President Jacob Zuma will have to address two audiences in his 2016 <a href="http://www.gov.za/speeches/state-nation-address-2016-2-feb-2016-1233">State of the Nation Address</a>: the international community and markets on the one hand, and the domestic public on the other.</p>
<p>The fiasco over the firing of Finance Minister <a href="https://theconversation.com/why-zumas-actions-point-to-shambolic-management-of-south-africas-economy-52174">Nhanhla Nene</a> has increased the risks to the South African economy. As a developing economy it is already feeling the impact of declining demand from China, a turbulent Europe and volatile emerging markets. </p>
<p>As things stand, South African fiscal managers suffer from a credibility malaise. The state of the nation address presents an opportunity for confidence building.</p>
<h2>Fiscal discipline</h2>
<p>The international community possibly has a bouquet of expectations in mind. But these cannot be fully satisfied because they are counterbalanced by domestic expectations. </p>
<p>Top of international expectations is a clear commitment to fiscal discipline - specifically a significant reduction of South Africa’s foreign debt which stands at <a href="http://www.saiia.org.za/opinion-analysis/2015-budget-too-little-too-late-for-south-africas-public-debt">44% </a>of GDP. At the same time, reaffirming the <a href="http://www.gov.za/issues/national-development-plan-2030">National Development Plan</a> would be vital to underscoring policy continuity and predictability. This is the governing African National Congress’s plan to eliminate poverty and reduce inequality.</p>
<p>The domestic audience’s endurance has been tested by a plethora of political intrigues. These include waves of <a href="https://theconversation.com/africa/topics/university-fees">student protests</a>, parliamentary party <a href="http://www.news24.com/SouthAfrica/News/Pay-back-the-money-adjourns-Parliament-again-20150618">wrestling</a>, <a href="https://theconversation.com/south-africa-is-on-a-cliff-edge-just-as-it-was-in-1985-53094">economic shocks</a>, the <a href="https://theconversation.com/south-africas-poor-face-rising-food-prices-as-drought-intensifies-52950">drought</a> and serious deficits in <a href="https://theconversation.com/why-zumas-actions-point-to-shambolic-management-of-south-africas-economy-52174">governance</a>. But no economic recovery plan appears to be in the pipeline. On top of this, the 9-point plan outlined in <a href="http://www.gov.za/president-jacob-zuma-state-nation-address-2015">last year’s speech</a> had no discernible impact on the economy.</p>
<p>The state power utility Eskom’s successful management of electricity supply is one of the few tales of success.</p>
<h2>Education</h2>
<p>A paradigm shift is needed to address the problems besetting education. There is a disconnect between the emerging new trends in the South African economy and an educational system based on the old economy. Mining and agriculture used to be the major employers. Today services, the financial sector, manufacturing and transport are bigger players.</p>
<p>Unfortunately, it is unlikely that Zuma will announce a package of structural changes even though education urgently needs a fundamental overhaul. </p>
<p>Tertiary education is over-centralised in universities. But they have insufficient capacity to provide the education and training needed to drive the economy. Diversification is imperative. The country needs additional technical and training colleges for teachers, nurses, agricultural students and artisans.</p>
<p>These should be complemented by advanced institutes for engineering, information communications and technology as well as tourism and hospitality. These institutions need to be established or reinstated where they have been closed down.</p>
<p>The private sector can also make a valuable contribution with its own specialised training. The sectors in which it could play a role include private health care, the automotive sector, aviation and the hotel sector. </p>
<p>Even with the same budget, tertiary education could become more cost-effective and produce more and better graduates with tailor-made skills. </p>
<p>The current Skills Training Education Authorities <a href="http://www.vocational.co.za/">(Setas)</a> system will have to be reconsidered. <a href="https://www.westerncape.gov.za/general-publication/fet-college-information">Further education and training</a> as well as technical, vocational and training colleges must be redesigned into specialised colleges with a much better professional reputation. </p>
<h2>Labour relations</h2>
<p>A third priority change should be in labour relations. Though exceptionally unpopular with the trade unions and the left in general, a fundamental reconsideration of the labour market is needed. </p>
<p>The dilemma is that while the economy continues to grow, albeit <a href="http://www.statssa.gov.za/?page_id=735&id=1">very slowly</a>, it does not produce jobs in low-income categories. Strikes in the public and mining sectors and over-politicisation of trade unions have created a stalemate in employment.</p>
<p>South Africa’s stage of development requires maximum employment as an absolute priority. A trade-off between employment and advanced service conditions is also unavoidable.</p>
<h2>The presidential conundrum</h2>
<p>A number of factors will impede Zuma’s opportunity to have a <a href="http://www.calldon.co.za/lula-moment/">‘Lula moment’</a> - that is, to radically reduce inequality like former Brazilian president Inácio Lula da Silva did.</p>
<p>Zuma has the political persona of a survivor with strong political insticts. But he has had to make three major concessions in just two months. These were:</p>
<ul>
<li><p>agreeing to at least one of the demands of protesting students,</p></li>
<li><p>back-tracking on his appointment of a new <a href="https://theconversation.com/zumas-about-turn-shows-power-of-the-south-african-media-and-the-markets-52315">finance minister</a>,</p></li>
<li><p>and being forced to repay state funds spent on his private residence in <a href="http://www.thepresidency.gov.za/pebble.asp?relid=21539">Nkandla</a>. </p></li>
</ul>
<p>There is a growing perception that his political capital in the ANC is <a href="http://ewn.co.za/2015/12/14/Study-Zuma-losing-popularity-among-South-Africans">diminishing</a>. His leadership authority is in decline: he presides over a party <a href="http://mg.co.za/article/2014-05-11-the-partys-over-anc-sees-decline-in-support">losing support</a>. ANC membership has been in <a href="http://mg.co.za/article/2015-10-09-zuma-blames-anc-kingmakers-for-membership-decline">decline </a> since 2012 and the party is paralysed by factionalism, particularly in provinces such as Kwa-Zulu Natal. The governing party’s relationship with its <a href="http://www.anc.org.za/kids/main.php?id=14">alliance partners</a> has reached a <a href="http://www.bdlive.co.za/business/financial/2016/01/14/cosatu-threatens-anc-on-elections">very low point</a>.</p>
<p>The forthcoming <a href="http://www.elections.org.za/content/Elections/2016-Municipal-Elections/Home/">municipal elections</a> will have a dampening effect on political decision-making. Any party prefers a relatively conservative and predictable strategy during election periods.</p>
<p>The need to keep the Congress of South African Trade Unions as an election partner will also put paid to the possibility of radical changes in the labour dispensation. The ANC is already embroiled in a bitter standoff with the union federation over <a href="http://ewn.co.za/2016/02/04/Cosatu-planning-big-strike-over-new-pension-laws">changes to pension laws</a>.</p>
<p>The final complicating factor is that international pressure has to be balanced against expectations of a domestic economic stimulus. Sentiments in the ANC are critical of international pressure and will insist on self-reliance. Zuma will therefore have to find a compromise between these.</p><img src="https://counter.theconversation.com/content/54443/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dirk Kotze does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>It is unlikely President Zuma will announce a structural changes in his State of the Nation Address. This, despite education being in dire need of fundamental restructuring and an economy in decline.Dirk Kotze, Professor in Political Science, University of South AfricaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/529992016-01-11T14:58:08Z2016-01-11T14:58:08ZSouth Africa’s ANC at 104: its rhetoric is no longer connected to reality<figure><img src="https://images.theconversation.com/files/107743/original/image-20160111-6992-i9214h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Supporters of South Africa's governing ANC at the party's 104 anniversary celebration in Rustenburg.</span> <span class="attribution"><span class="source">Reuters/Siphiwe Sibeko</span></span></figcaption></figure><p>When language is alive and searches for new ways to illuminate reality and possibility, it can attain real power. Philosopher Jean-Paul Sartre <a href="https://books.google.co.za/books?id=TPHtpmeyL4AC&pg=PA89&lpg=PA89&dq=Jean-Paul+Sartre:+:Words+wreak+havoc+.+.+.%22&source=bl&ots=85pd_OmyP4&sig=qsBM60jwVCDVgTAoVDjEzY06ftc&hl=en&sa=X&ved=0ahUKEwjUndbH4KHKAhUEWxQKHZ3OCgcQ6AEIKjAF#v=onepage&q=Jean-Paul%20Sartre%3A%20%3AWords%20wreak%20havoc%20.%20.%20.%22&f=false">wrote</a>:</p>
<blockquote>
<p>Words wreak havoc … when they find a name for what had … been lived namelessly. </p>
</blockquote>
<p>But when language is dead and takes the form of deliberately making statements that no-one believes to be true, it is often little more than a worn and dreary mask for power. The same is true when it repeats concepts and clichés that have lost any meaningful connection to reality.</p>
<p>For more than 100 years there have often been moments when South Africa’s governing African National Congress <a href="http://www.anc.org.za/">(ANC)</a> and its leaders have been able to speak to and for the nation with the resonance and moral authority that can come from matching the right words with the right actions at the right time.</p>
<p>And when the ANC has not been at the forefront of political innovation, its organisational strength has often enabled it to eventually absorb much of what has been achieved by independent initiative. This has allowed the party to renew itself and to sustain its vitality, connection to the present and moral authority.</p>
<h2>Loss of credibility</h2>
<p>But at the end of 2015 the ANC’s credibility and its claim to represent the nation were <a href="http://mg.co.za/article/2014-05-11-the-partys-over-anc-sees-decline-in-support">rapidly eroding</a>. In many quarters Jacob Zuma had become a particular liability. He was <a href="https://www.enca.com/south-africa/zuma-booed-heckled-crowd">booed</a> at Nelson Mandela’s memorial. He is regularly <a href="http://www.news24.com/SouthAfrica/Politics/Malema-Zuma-scared-of-white-people-20140618">insulted</a> by Julius Malema from the radical <a href="http://effighters.org.za/about-us/">Economic Freedom Fighters</a> and is increasingly condemned in <a href="http://www.iol.co.za/news/south-africa/gauteng/students-chant-zuma-must-fall-1.1934747">popular protest</a>.</p>
<p>At the end of last year the debacle around the firing of <a href="https://theconversation.com/the-removal-of-south-africas-finance-minister-is-bad-news-for-the-country-52170">Nhlanhla Nene</a> as finance minister led many to conclude that Zuma was unashamedly willing to place his <a href="https://theconversation.com/why-zumas-actions-point-to-shambolic-management-of-south-africas-economy-52174">own interests</a> before those of the nation.</p>
<p>As the new year began, the reaction to estate agent <a href="http://www.news24.com/SouthAfrica/News/its-just-the-facts-penny-sparrow-breaks-her-silence-20160104">Penny Sparrow’s</a> racist obscenities relieved some of the pressure on both the ANC and Zuma. But the ANC cannot afford complacency – not with a <a href="https://theconversation.com/why-south-africas-economy-is-likely-to-grow-more-slowly-than-its-potential-46158">floundering economy</a>, escalating <a href="https://theconversation.com/protests-soar-amid-unmet-expectations-in-south-africa-42013">popular protests</a>, <a href="http://afrobarometer.org/sites/default/files/publications/Dispatches/ab_r6_dispatchno66_south_africa_zuma_trust_and_performance_24112015.pdf">declining trust</a> in the president, entrenched <a href="http://mg.co.za/article/2012-07-19-darkness-visible-in-jacob-zumas-kingdom-by-the-sea">conflict within the party</a> and upcoming <a href="http://www.news24.com/MyNews24/2016-municipal-elections-20140610">local elections</a>.</p>
<p>Despite this, the <a href="http://www.anc.org.za/show.php?id=11874">anniversary statement</a> by the party’s National Executive Committee, read out by Zuma in a half-empty stadium in Rustenburg, showed no sign of any willingness to venture an honest assessment of the state of the party and the country.</p>
<p>As usual it sought to place today’s ANC in a heroic lineage and present it as the principle actor in the grand drama of the people. But <a href="http://www.southafrica.net/za/en/articles/entry/article-southafrica.net-rustenburg">Rustenburg</a> is not too far from the scene of the <a href="https://theconversation.com/marikana-massacre-how-south-african-journalism-failed-the-test-51130">Marikana massacre</a> where 34 striking miners were killed by the South African police. And it’s not been long since students, mostly organised outside of the ANC, seized the political initiative and embarked on <a href="http://kafila.org/2015/10/24/south-african-student-protests-and-re-emergence-of-peoples-power-camalita-naicker/">protests</a> against racism and rising university fees.</p>
<p>The annual restatement of the ANC’s basic political catechism – <a href="http://witspress.co.za/catalogue/the-origins-of-non-racialism/">non-racialism</a>, the <a href="http://www.anc.org.za/show.php?id=2356">National Democratic Revolution</a>, and so on - carries very little weight in a moment in which the party’s ideas are routinely spurned in the public sphere, particularly by young intellectuals.</p>
<p>And everybody knows that to speak, say, of “the highest standards of revolutionary morality” in the wake of <a href="https://theconversation.com/marikana-shining-the-light-on-police-militarisation-and-brutality-in-south-africa-44162">Marikana</a> or the <a href="http://citizen.co.za/wp-content/uploads/sites/18/2014/03/Nkandla-Statement-by-Public-Protector-19-March-2014.pdf?d580fc">Nkandla scandal</a> involving the spending of public money for Zuma’s private homestead, is simply not credible.</p>
<p>To affirm success in the project of “providing quality basic education”, as Zuma did in Rustenburg, is just <a href="http://www.equaleducation.org.za/file/2015-02-03-equal-education-shadow-report-1">not honest</a>. In the wake of the more or less complete abandonment of the party by intellectuals, no-one can believe that the mere statement of a call to “the intelligentsia” to “join hands with the ANC” carries the resonance of language forged on the anvil of reality.</p>
<h2>An era of profound cynicism</h2>
<p>When words become this radically disconnected from actions and the imperatives of the moment, politics enters a terrain constituted by a profound cynicism. </p>
<p>On this terrain it’s not even possible to campaign, reminisce or imagine a future in the energised language of inspiration. The stolid prose of the committee that must give a ritual nod to each constituency is almost all that there is.</p>
<p>So, as Zuma read out the <a href="http://www.anc.org.za/">NEC’s statement</a>, there was a nod to the economic mainstream via an utterance committing to reduce debt and attain growth, and a nod to the unions via a commitment to a minimum wage. The <a href="http://www.poa.gov.za/news/Documents/NPC%20National%20Development%20Plan%20Vision%202030%20-lo-res.pdf">National Development Plan</a>, the ANC government’s new long-term macroeconomic plan favoured by liberals, received a nod. So did the declaration of solidarity with Cuba, favoured by communists in the governing <a href="http://www.anc.org.za/kids/main.php?id=14">tri-partite alliance</a>. </p>
<p>But there was no sense that adequate measure had been taken of the country’s situation, difficult decisions made, and new commitments affirmed. In the main the statement is saturated with a sense of stasis and an unwillingness to think the now and the new.</p>
<p>Where there is some novelty it appears as concessions to new forms of political innovation, often well able to produce a language with real-life and genuine resonance, that have emerged at a distance from the ANC. </p>
<p>Space was made for the <a href="http://effighters.org.za/policy/on-land/">EFF’s</a> reframing of the land question in terms of colonial theft. Reference was also made to the necessity of increasing funding for tertiary education and the growing public refusal to tolerate overt expressions of racism. </p>
<h2>Following instead of leading</h2>
<p>But in each of these cases the ANC is following, because it has to, rather than leading. </p>
<p>The cynical conflation of state power with <a href="http://readingfanon.blogspot.co.za/2012/02/from-peoples-politics-to-state-politics.html">people’s power</a> was a clear indication that the ANC remains committed to containing the escalating crisis by centralising power rather than seeking to resolve it by dispersing power. The same applies to its equally cynical <a href="http://www.iol.co.za/news/democratic-culture-zuma-has-no-clue-1.1968836">framing</a> of legitimate forms of political engagement undertaken outside of the party as anti-democratic.</p>
<p>The only time Zuma’s comments carried any real life was when he departed from the script. His <a href="https://www.youtube.com/watch?v=hLnx4r7aprM&feature=youtu.be--">instruction</a> to the Youth League to defend the party was certainly a direct intervention into the heat of the moment.</p>
<p>The ANC has often spoken truth to power. But the statement was, at its core, a matter of speaking power to truth.</p><img src="https://counter.theconversation.com/content/52999/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Pithouse has worked with a number of grassroots organisation that are strenuously critical of the ANC.</span></em></p>For more than 100 years South Africa’s ruling ANC and its leaders have often been able to speak to and for the nation with resonance and moral authority, their words matching actions. Not any more.Richard Pithouse, Associate Professor in Politics, Rhodes UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/529152016-01-08T12:28:32Z2016-01-08T12:28:32ZSouth Africa’s governing party celebrates 104 years amid growing disaffection<figure><img src="https://images.theconversation.com/files/107646/original/image-20160108-3301-pkxju6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">South Africa's governing African National Congress celebrates its 104th anniversary this year, ahead of crucial local government elections. </span> <span class="attribution"><span class="source">Reuters/Mike Hutchings </span></span></figcaption></figure><p>South Africa’s governing African National Congress celebrates its 104th birthday in 2016. In keeping with tradition, the party’s president Jacob Zuma will deliver the annual <a href="http://www.anc.org.za/list.php?t=January%208th%20Statements">January 8 statement</a>, mapping out the party’s main activities for the year ahead.</p>
<p>Historically, the statement has set the tone for government and informed the president of the country’s annual state of the nation <a href="http://www.gov.za/state-nation-address-2015">address</a>, at the opening of Parliament in February. </p>
<p>The event will be keenly watched to, among other things, gauge what the party considers to be the main challenges facing the country; and how it plans to lead in navigating them. </p>
<p>Among the reasons Zuma’s speech will be closely watched include:</p>
<ul>
<li><p>It comes in the same week that <a href="http://businesstech.co.za/news/government/108103/anc-defends-white-south-africans-in-racism-row/">racism</a> dominated national discourse. There have been numerous calls for it to be either criminalised or punished <a href="http://www.usatoday.com/story/news/world/2016/01/07/south-africa-racism-fight/78404322/">more harshly</a>.</p></li>
<li><p>The devastating blow to the economy caused by his recent <a href="https://theconversation.com/the-removal-of-south-africas-finance-minister-is-bad-news-for-the-country-52170">firing</a> of Finance Minister Nhlanhla Nene. Zuma’s handling of the <a href="https://theconversation.com/why-zumas-actions-point-to-shambolic-management-of-south-africas-economy-52174">issue</a> saw mounting calls for his <a href="http://ewn.co.za/2015/12/17/Over-6000-attend-ZumaMustFall-marches">dismissal</a>.</p></li>
<li><p>Upcoming municipal elections, which come amid <a href="https://theconversation.com/annulled-local-byelections-shed-light-on-the-state-of-south-africas-democracy-52100">declining electoral support</a>. </p></li>
<li><p>Rising disaffection with the slow pace of change, as shown by <a href="https://theconversation.com/protests-soar-amid-unmet-expectations-in-south-africa-42013">soaring</a> popular protests about poor delivery on key socioeconomic issues. Unemployment, poverty and inequality remain <a href="https://theconversation.com/south-africa-why-economic-freedom-is-proving-to-be-the-ancs-undoing-48339">stubbornly high</a>.</p></li>
<li><p>Growing anger at rampant government <a href="http://www.news24.com/SouthAfrica/News/Hundreds-march-against-corruption-in-Cape-Town-20150930">corruption</a>, culminating in marches by civil society.</p></li>
<li><p>Recent <a href="https://theconversation.com/africa/topics/university-fees">student protests</a> against rising university fees as well as against racism and vestiges of colonialism in curricula. </p></li>
<li><p>Stubbornly high <a href="https://theconversation.com/factcheck-is-south-africa-the-most-unequal-society-in-the-world-48334">inequality</a>, <a href="https://theconversation.com/a-fresh-look-confirms-national-minimum-wage-would-be-good-for-south-africa-51209">poverty</a> and <a href="https://theconversation.com/how-a-wage-subsidy-can-alleviate-south-africas-youth-unemployment-46902">unemployment</a>.</p></li>
<li><p>Rising <a href="https://theconversation.com/why-south-africas-governing-alliance-is-doing-some-serious-stock-taking-44046">factionalism </a> that has weakened the governing tripartite alliance with the Congress of South African Trade Unions and the South African Communist Party.</p></li>
</ul><img src="https://counter.theconversation.com/content/52915/count.gif" alt="The Conversation" width="1" height="1" />
Pundits will closely watch President Jacob Zuma’s January 8 statement to see what he and the governing ANC consider to be priorities for the country in 2016.Thabo Leshilo, Politics + SocietyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/523212015-12-14T15:36:45Z2015-12-14T15:36:45ZWhy the actions of South Africa’s president have rendered him a lame duck<figure><img src="https://images.theconversation.com/files/105806/original/image-20151214-9515-alyosy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Jacob Zuma's bungling over the finance minister position has left him politically vulnerable.</span> <span class="attribution"><span class="source">Reuters/Siphiwe Sibeko</span></span></figcaption></figure><p>Mayhem is the only word that can describe President Jacob Zuma’s shock <a href="http://www.thepresidency.gov.za/pebble.asp?relid=21231">reversal</a> of the appointment of almost-finance minister David van Rooyen. Markets <a href="http://sbeta.iol.co.za/business/companies/banks-surge-on-gordhan-1960019">welcomed</a> the move to the well-known and trusted Pravin Gordhan, the former minister of finance, and the local currency <a href="http://www.bloomberg.com/news/articles/2015-12-13/south-africa-s-zuma-appoints-pravin-gordhan-as-finance-minister">jumped for joy</a> in the minutes following the announcement.</p>
<p>As much as the nomination of Gordhan is to be welcomed, it poses a number of serious questions about Zuma’s fitness to hold office.</p>
<h2>Behind the reversal</h2>
<p>In his statement Zuma <a href="http://www.thepresidency.gov.za/pebble.asp?relid=21231">wrote</a> that: </p>
<blockquote>
<p>I received many representations to reconsider my decision. As a democratic government, we emphasise the importance of listening to the people and to respond to their views.</p>
</blockquote>
<p>Zuma will indeed have had many reasons to reconsider his decision. All he had to do was open a South African <a href="http://www.bdlive.co.za/opinion/2015/12/11/self-interest-and-petty-politics-behind-zumas-latest-blow-to-economy">newspaper</a> or read a story on South Africa in any international <a href="http://www.nytimes.com/reuters/2015/12/09/world/africa/09reuters-safrica-finmin.html">newspaper</a>. The voices were loud, clear, and spoke in unison: the <a href="http://www.thepresidency.gov.za/pebble.asp?relid=21223">dismissal</a> of Nhlanhla Nene was a colossal mistake. </p>
<p>But if Zuma cared about public opinion he would reverse his stance on a number of other issues as well, starting with the luxury upgrades to his private home in <a href="http://www.publicprotector.org/library%5Cinvestigation_report%5C2013-14%5CFinal%20Report%2019%20March%202014%20.pdf">Nkandla</a>.</p>
<p>The deeper reasons, and power shifts, within the ruling African National Congress that led to this shocking plot twist have yet to be unveiled. But even at this early stage, four points can safely be concluded.</p>
<h2>Zuma has lost control on two fronts</h2>
<p>First and foremost, Zuma has lost control of his administration. Assuming he asked for advice before his announcement, one of three possibilities present themselves – he was ill-advised; he chose his advisers miserably; or he simply ignored their input.</p>
<p>Alternatively, he is easily swayed by public opinion and rectified his mistake as soon as the public outcry reached his office.</p>
<p>Any of these cases would be bad and would show a lack of leadership.</p>
<p>Second, Zuma has lost control of his party and will be a lame duck from now on.</p>
<p>The term usually refers to presidents in their last year of office. For example, some commentators said US President Barack Obama was a lame duck until he managed to engineer a path-breaking <a href="http://www.bdlive.co.za/business/energy/2015/12/14/cabinet-gives-green-light-to-nuclear-procurement">nuclear deal</a> with Iran and helped put together the historic <a href="https://theconversation.com/africa/paris-2015">Paris agreement</a> on climate change. </p>
<p>While Obama has shown that not all outgoing presidents need to be lame ducks, Zuma’s experience shows that you can become a lame duck even if you still have plenty of time on your presidential watch. </p>
<p>The back and forth on the key cabinet position leaves Zuma in precisely that position.</p>
<p>His second-sharpest weapon as president – the nomination and redeployment of cabinet members – has been taken away, leaving him with only his sharpest weapon: helping his cronies gain positions of power within government. But if his sharpest weapon were enough to keep his party in check, van Rooyen would still be finance minister today.</p>
<h2>Impact on the economy</h2>
<p>Third, the government has put the South African economy in a very vulnerable position. The country has a glaring current account deficit, and is heavily dependent on the goodwill of <a href="http://www.reuters.com/article/safrica-currentaccount-idUSL8N13X10Y20151208">international investors</a>. </p>
<p>What this means on the monetary side is as follows: as trust in the country evaporates so do capital flows. The country’s currency plummets and the price of imports, including oil, goes up. This increases the risk of inflation, forcing the Reserve Bank to raise interest rates which in turn curtails lacklustre economic growth even further. </p>
<p>The country is also vulnerable on the fiscal side. South Africa, like all countries that have debt, depends on favourable ratings and benevolent investors. But if debt levels grow because of wasteful government spending, including subsidising incompetent management of state-owned entities, and using social grants as an easy way to buy votes in rural areas, investors start getting very cautious. The consequence is a downgrading of the country’s ratings which in turn raises the cost of servicing the debt.</p>
<p>This, sadly, is the path the country’s economy is currently on.</p>
<p>Fourth, Nene’s dismissal was an attack on one of South Africa’s most respected institutions, the National Treasury. It is unlikely that Zuma’s reversal means the attack has been stopped. The latest events fit into a pattern that has become prevalent under Zuma’s presidency. This includes attacking institutions if they get in his way. A case in point are attacks, big and small, levelled against the public protector, <a href="http://www.bdlive.co.za/national/2015/08/04/thuli-madonsela-deplores-attacks-defiance-for-eroding-the-value-of-her-office">Thuli Madonsela</a>. Actions such as these speak of a very clear and nasty language.</p>
<h2>The #ZumaMustFall campaign</h2>
<p>The #ZumaMustFall movement is gaining momentum. The first marches are already being organised. An <a href="http://www.timeslive.co.za/politics/2015/12/12/Over-100000-sign-petition-saying-ZumaMustFall">online petition</a> quickly gathered more than 100,000 votes.</p>
<p>It is unlikely that the re-installment of Gordhan will put the minds of South Africans at ease. Neither should it, because it is a red herring. What this week has shown is that Zuma is no longer fit for office. It has shown that he lacks a number of important characteristics that a president needs to have to lead a country. These include good judgement, foresight and economic finesse. </p>
<p>Many of these shortcomings were known for years. An added dimension has come into play this week: to be effective, a president needs power.</p>
<p>Zuma has shown himself the door. He is standing there, unsure what to do next. It is time South Africans came together and gave the old man a helping hand to exit.</p><img src="https://counter.theconversation.com/content/52321/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Co-Pierre Georg does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>South African President Jacob Zuma has lost control of his party and his administration. It is time citizens came together and gave the old man a helping hand to exit.Co-Pierre Georg, Senior Lecturer, African Institute for Financial Markets and Risk Management, University of Cape TownLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/523152015-12-14T10:26:25Z2015-12-14T10:26:25ZZuma’s about-turn shows power of the South African media, and the markets<figure><img src="https://images.theconversation.com/files/105751/original/image-20151214-9515-1w3hb8v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Pravin Gordhan is considered an independent mind. His return as South Africa's finance minister will boost investor confidence. </span> <span class="attribution"><span class="source">EPA/Dai Kurokawa</span></span></figcaption></figure><p><em>South Africa has had three <a href="http://www.thepresidency.gov.za/pebble.asp?relid=21231">finance ministers</a> in the space of four days. First President Jacob Zuma replaced the trusted and competent Nhlanhla Nene with <a href="http://www.timeslive.co.za/politics/2015/12/10/Who-is-David-van-Rooyen-The-man-who-must-fill-Nenes-shoes">David van Rooyen</a>, a malleable backbencher with a poor service delivery record. Four days later he reversed the decision and brought back <a href="http://www.treasury.gov.za/ministry/minister.aspx">Pravin Gordhan</a>, a veteran politician and respected former finance minister. The Conversation Africa business and economy editor Andile Makholwa asked professor Adrian Saville about the implications of the events.</em> </p>
<p><strong>What is the significance of Zuma’s about-turn?</strong></p>
<p>He has done a lot of damage to the country. The firing of Nene was without good reason. The person he appointed to replace him, David van Rooyen, was completely unknown and the little we do know about him is discouraging.</p>
<p>The decision was poorly communicated. I think government could have done better on this. They could have been cleverer and recognised that the markets are watching. </p>
<p>The fact that Zuma has responded to the media and the markets indicates how powerful these institutions are. His response – appointing Gordhan – is remarkable. Gordhan is known by the markets and <a href="http://www.financialmail.co.za/coverstory/2014/12/11/local-government-reform-pravins-big-challenge">did a good job</a> when he was finance minister. </p>
<p><strong>What is the long-term effect of these events likely to be – for the economy, for fiscal policy, for the country?</strong></p>
<p>I would describe the long-term effects for the country as dire if we were talking about events before the re-appointment of Gordhan. The outlook is better now. Gordhan is capable leader and has a strong independent mind, which is what you need to run institutions like the country’s National Treasury. Nene also had an independent mind. That was why his dismissal was met with dismay.</p>
<p><strong>What is the price tag you would put on the events of the last four days? What has the cost been to the country?</strong></p>
<p>It’s very hard to put a price on it. But it’s clear that the markets have lost confidence. There are also issues of trust with the government.</p>
<p>According to calculations done by <a href="https://www.citadel.co.za/">Citadel</a>, a wealth management firm, after Nene was fired the Johannesburg Stock Exchange lost R230 billion in value, the bond market lost R217 billion and the increase in government’s future funding costs per year went up by R20 billion.</p>
<p>Depending what GDP estimates and currency rate you use, the losses on the stock exchange and the bond market, which make up most of domestic retirement savings, equates to between 10% and 15% of South Africa’s GDP. With the country’s economy currently growing at a nominal (that is, not adjusted for inflation) rate of between 5%-6%, it means that over just two days the next two years worth of GDP growth from savings was wiped out. </p>
<p><strong>Why does the president have to tread carefully when replacing a finance minister?</strong></p>
<p>He doesn’t have to. It’s his prerogative to appoint and dismiss ministers as he likes. The constitution empowers him to do so.</p>
<p>Nevertheless, the events of the past four days demonstrate that he should tread carefully. These kinds of decisions – dismissing and appointing finance ministers – are not taken in a vacuum. They take place within a context. South Africa has a very <a href="http://www.saiia.org.za/opinion-analysis/2015-budget-too-little-too-late-for-south-africas-public-debt">high debt level</a> and the <a href="http://mg.co.za/article/2015-10-22-slow-economic-growth-leaves-sa-with-little-room-to-manoeuvre">economy is struggling</a> to grow. You need to keep investors, both domestic and international, informed about decisions that may affect the market.</p>
<p><strong>Will the return of Pravin Gordhan undo the damage that has been caused to South Africa’s economy?</strong></p>
<p>It can’t undo the damage in a day. It will take a while. I suspect this will stay with Zuma for the rest of his term. They say the markets have a long-term memory. I don’t think they will forget this easily. But he’s done a good job by reversing his decision. That was brave and we need to commend him for that.</p>
<p><strong>It’s been suggested that this will lead to Zuma being recalled. What do you think?</strong></p>
<p>That is purely speculative. It will be very hard for the ruling African National Congress to recall him. The party <a href="http://mg.co.za/article/2008-09-20-anc-recalls-mbeki">recalled</a> then-president Thabo Mbeki in 2008. It would be damaging for it to do a second recall of the president.</p>
<p><strong>What do you think should be done to restore investor confidence in South Africa?</strong></p>
<p>The government needs to do a lot of what it has now started to do. There must be more open and transparent communication as well as consistency and stability in policy. It must put the country first.</p><img src="https://counter.theconversation.com/content/52315/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Adrian Saville is chief strategist for Citadel, a wealth management firm.</span></em></p>South Africa has had three finance ministers in four days. President Jacob Zuma will live with the fall-out for the rest of his term. Markets have a long-term memory and won’t easily forget.Adrian Saville, Visiting Professor of Economics and Finance, Gordon Institute of Business Science, University of PretoriaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/523132015-12-14T08:28:13Z2015-12-14T08:28:13ZAcademics in South Africa voice their dismay at Zuma’s actions<figure><img src="https://images.theconversation.com/files/105742/original/image-20151214-9526-i0l4ro.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">South African academics are extremely worried about President Jacob Zuma's axing of the finance minister.</span> <span class="attribution"><span class="source">Reuters/Stefanie Loos</span></span></figcaption></figure><p><em>In a rare move, dozens of academics from the country’s universities have written an open letter criticising President Jacob Zuma’s decision <a href="http://www.rdm.co.za/politics/2015/12/09/nene-fired-zuma-s-capture-of-the-state-is-now-complete">to fire</a> his Finance Minister Nhlanhla Nene. The letter was published in <a href="http://www.bdlive.co.za/opinion/letters/2015/12/14/letter-academics-voice-concerns-on-firing-of-finance-minister">Business Day</a>, South Africa’s leading business newspaper. We republish the letter here.</em></p>
<p>We the undersigned, academics in economics and related disciplines at South African universities, while not necessarily agreeing on all aspects of economic policy, are shocked and disturbed by the decision of President Zuma to remove Nhlanhla Nene as Minister of Finance.</p>
<p>This concern is not only about Mr Nene. It is also about the sudden way in which the change occurred. It seems that the president failed to understand or ignored the seriousness of the context and inevitable negative consequences for the economy and all citizens of South Africa.</p>
<p>We accept that finance ministers in other countries, both developed and developing, have been removed from office and have no special protection. However, in the context of the interconnected global economy and highly fragile global and national economy we find ourselves in, such decisions, we would argue, cannot be made lightly or capriciously. Neither can they be made without adequate and well communicated reasons that can be understood unambiguously by citizens, the markets and all relevant stakeholders.</p>
<p>We would expect, in conditions which include <a href="http://www.cnbcafrica.com/news/southern-africa/2015/10/21/south-africa-growth-slow-nene/">slow growth</a>, <a href="http://www.tradingeconomics.com/south-africa/unemployment-rate">high unemployment</a>, growing income inequality, a troubling fiscal outlook, and a recent credit rating downgrade to just above <a href="http://www.economist.com/news/middle-east-and-africa/21679693-mismanagement-and-magical-thinking-are-driving-rainbow-nation-debt">junk status</a>, that any replacement minister would immediately be able to command the respect of all stakeholders. We would expect that she or he would have the stature, calibre, record, and experience to continue to carry out the policy mandate of government, and command the respect of all South Africans, the markets and stakeholders. In our judgement none of these considerations were taken into account.</p>
<p>As minister of finance, Mr Nene has shown that he has not only a clear understanding of the many economic and financial crises facing South Africa, but also a clear and detailed plan to avoid the major risks we currently face. It should therefore not be surprising that the field has been left open to speculation of all kinds.</p>
<p>The timing of the announcement of Mr Nene’s removal is most unfortunate, with the country on the verge of a further credit rating downgrade by rating agencies. Mr Nene was widely respected and brought stability to the National Treasury. Economic institutions such as the National Treasury, the South African Reserve Bank, Statistics South Africa and the South African Revenue Service have been indispensable and essential bulwarks during the continuing global economic crisis. Current threats to the effective functioning of such institutions undermines the national interest.</p>
<p>Removing Mr Nene gives the impression that President Zuma does not care about the impact of the withdrawal of investment that we are currently experiencing, the rising cost of borrowing, the instability of our currency, the growing inequality, and rising inflation. Or he doesn’t understand that in the current context of 0.7% growth and a <a href="http://www.bbc.com/news/world-africa-34884135">serious drought</a>, this action imposes huge risks to the living circumstances of poor South Africans and to the stability of the country. Or, more ominously, the possibility that the president simply did not consider the impacts of his decision to remove Mr Nene could explain the panic and speculation which has ensued.</p>
<p>As academics in economics and related disciplines we express our unambiguous and urgent concern both about this event, and about the general lack of progress in tackling the massive and growing crisis of low growth, poverty unemployment and inequality.</p>
<p>Collectively supported by:</p>
<p><strong>University of Cape Town</strong>:</p>
<p>Prof Cally Ardington, Prof Haroon Bhorat, Prof Anthony Black, Prof Justine Burns, Prof John Paul Dunne, Prof Lawrence Edwards, Prof Alan Hirsch, Prof Faizel Ismail, Prof Evance Kalula, Prof David Kaplan, Prof Malcol Keswell
Prof Murray Leibbrandt, Prof Tony Leiman, Prof Brian Levy
Prof Mike Morris, Prof Edwin Muchapondwa, Prof Efi Nikolaidou
Prof Vimal Ranchhod, Prof Don Ross, Prof Hana Ross, Prof Mills Soko, Prof Corne van Walbeek, Prof Francis Wilson, Prof Martine Visser, Prof Martin Wittenberg, Prof Ingrid Woolard, Dr Nicola Branson, Dr Lea Esterhuizen, Dr Dambala Gelo, Dr Co-Pierre Georg, Dr Kevin Kotze, Dr Cecil Mlatsheni, Dr Jane Turpie, Mrs Katherine Eyal, Mrs Leigh Neethling, Mr Morne Oosthuizen, Mr Christopher Rooney, Mr Grant Smith, Mr Benjamin Stanwix, Ms Caroline Skinner. </p>
<p><strong>University of Free State</strong></p>
<p>Prof Philippe Burger, Prof Frikke Booysen</p>
<p><strong>University of Johannesburg</strong></p>
<p>Prof Samatha Ashman, Prof Simon Roberts, Prof Fiona Tregenna.</p>
<p><strong>University of KwaZulu-Natal</strong></p>
<p>Prof Dori Posel, Prof Francie Lund, Dr Claire Vermaak, Ms Cathy Sutherland.</p>
<p><strong>University of Pretoria</strong></p>
<p>Prof Riel Franzsen, Prof Johann Kirsten, Prof Steve Koch, Prof Elsabe Loots, Prof Jan van Heerden, Prof Niek Schoeman, Prof Renee van Eyden, Prof Nicola Viegi. </p>
<p><strong>Rhodes University</strong></p>
<p>Prof Gavin Keeton, Prof Robert van Niekerk, Prof Larry Strelitz, Prof Lynette Steenveld, Dr John Reynolds. </p>
<p><strong>University of Stellenbosch</strong></p>
<p>Prof Wimpie Boshoff, Prof Ronelle Burger, Prof Rulof Burger, Prof Stan du Plessis, Prof Johan Fourie, Prof Rachel Jafta, Prof Ada Jansen, Prof Theo Kleynhans, Prof Andrie Schombee, Prof Ben Smit, Prof Servaas van der Berg, Dr Dieter von Fintel, Dr Marisa von Fintel, Dr Hylton Hollander, Dr Nicholas Spaull, Mrs Olvia Eziobi, Miss Carina Smit, Mr Le Roux Burrows, Ms Anja Smith, Mx Nwabisa Makaluza, Mr Eldridge Moses, Dr Chris van Wyk, Ms Pietie Horn, Mrs Liezl Nieuwoudt. </p>
<p><strong>University of the Western Cape</strong></p>
<p>Prof Ben Cousins, Prof Andries du Toit, Prof Ruth Hall, Prof Julian May, Prof Chris Tapscott, Prof John Williams. </p>
<p><strong>University of the Witwatersrand</strong></p>
<p>Prof Akin Akinkugbe, Prof Daniela Casale, Prof Jannie Rossouw, Prof Vishnu Padayachee, Prof Eric Schaling, Prof Imraan Valodia, Dr Prudence Magejo, Dr Gareth Roberts, Ms Lyndall Keeton, Ms Janine Dingley, Mr Lumkile Mondi.</p><img src="https://counter.theconversation.com/content/52313/count.gif" alt="The Conversation" width="1" height="1" />
Academics from several South African universities say that in the current world economy decisions about any country’s finance minister cannot be made “lightly or capriciously”.Caroline Southey, Founding EditorLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/521612015-12-11T17:14:59Z2015-12-11T17:14:59ZWhy South Africa should gird itself for tumultuous times<figure><img src="https://images.theconversation.com/files/105504/original/image-20151211-8326-4s574v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">South Africa's nuclear deal with Russia is part of the backdrop to the current crisis.</span> <span class="attribution"><span class="source">Reuters/Alexei Nikolsky</span></span></figcaption></figure><p>South African President Jacob Zuma’s latest cabinet reshuffle in the Ministry of Finance is arguably the most controversial of all his executive decisions. It is the seventh <a href="http://city-press.news24.com/News/The-mystery-of-Cabinet-reshuffles-20150503">cabinet reshuffle</a> since he became president in 2009 and the third since 2014.</p>
<p>Presidents Nelson Mandela and Thabo Mbeki only reshuffled their cabinets after general elections. The Zuma era, on the other hand, has been characterised by a high turnover, not only of cabinet members, but also senior public officials and executives in state-owned enterprises.</p>
<p>Zuma’s latest decisions - initially to remove Finance Minister Nhlanhla Nene but then four days later to succumb to pressure and <a href="http://www.bbc.com/news/business-35089312">replace</a> his new appointee <a href="http://www.fin24.com/Economy/meet-david-van-rooyen-the-man-who-must-fill-nenes-shoes-20151210">David van Rooyen</a> with <a href="http://www.bloomberg.com/news/articles/2015-12-13/south-africa-s-zuma-appoints-pravin-gordhan-as-finance-minister">Pravin Gordhan</a> - has left everyone speculating as to the real reasons. Gordhan is a much more prudent appointment but a major political concession from Zuma.</p>
<p>What does it tell us about how decisions are being taken?</p>
<p>Some argue that it is indicative of Zuma’s uncontested power in the governing African National Congress <a href="http://www.anc.org.za/">(ANC)</a>; that he has developed an almost autocratic presidential style.</p>
<p>Another argument is that it is symptomatic of his predicament in the ANC. This line of thinking is informed by the fact that the ANC is weaker than it’s been since coming to power in 1994.</p>
<p>The ANC has been losing membership – more than <a href="http://www.sabc.co.za/news/a/007110004a25f5b7bd09ffa53d9712f0/ANCundefinedlosingundefinedmembersundefinedinundefineddroves-20150910">450,000</a> members on Zuma’s watch.</p>
<p>And a key player in the <a href="http://www.anc.org.za/kids/main.php?id=14">tripartite alliance</a>, the trade union federation <a href="http://www.cosatu.org.za/">Cosatu</a>, split earlier this year resulting in a drastic <a href="http://www.news24.com/SouthAfrica/News/cosatu-membership-down-by-thousands-20151117">drop</a> in membership. The split saw the metal workers’ union Numsa expelled over differences about the federation’s relationship with the ANC. </p>
<p>In addition, seasoned and senior party members have begun to voice their concerns about Zuma. Former president and ANC leader Kgalema Motlanthe’s recently made harsh criticism of his leadership. He also declared that the tripartite alliance was <a href="http://www.bdlive.co.za/national/2015/11/02/tripartite-alliance-is-dead-says-motlanthe">dead</a>. </p>
<p>His comments followed those of another party stalwart, <a href="http://www.news24.com/SouthAfrica/News/Chikane-warns-of-ANCs-demise-20151003">Rev Frank Chikane</a>, who warned that the party faced the danger of losing future elections. </p>
<p>To add to Zuma’s woes, the contest for who takes over from him has begun. Current deputy president Cyril Ramaphosa has put his hat in the ring. And the trade union federation has implied it will support him as <a href="http://www.msn.com/en-za/money/topstories/why-cosatu-wants-cyril-ramaphosa/ar-AAfMEuF?li=AAaxc0E">Zuma’s successor</a>.</p>
<h2>Paranoia</h2>
<p>The growing factionalism in the ANC has left Zuma unsure who he can trust, even in his own province KwaZulu-Natal. The result has been signs of growing paranoia, particularly about possible critical or independent voices in the ANC. He considers all as threats to his position. </p>
<p>In the past, Zuma built a stronghold of support, through patronage, in the government’s security cluster – police, state security, military and prisons – which he staffed with his acolytes. </p>
<p>He did the same with the National Prosecuting Authority and some of the parastatals, using the appointments to secure support for himself. </p>
<p>The latest intervention against his minister of finance shows two things:</p>
<ul>
<li><p>how far he is prepared to go to protect his supporters in state-owned enterprises who serve his self interests. Nene had taken a hard line against a disastrous <a href="http://www.iol.co.za/business/companies/nene-tells-saa-to-lease-airbuses-1.1956115#.VmrHS0p97IU">financial decision</a> taken by South African Airways chairperson Dudu Myeni, who is <a href="http://www.biznews.com/leadership/2015/08/13/breathtaking-the-world-according-to-saa-chairman-dudu-myeni/">close</a> to Zuma; and </p></li>
<li><p>how important state finances are to him as a tool to develop a personal style of diplomacy with leaders on the world stage. Here deal-making, whether for <a href="https://theconversation.com/why-nuclear-power-would-be-a-bad-option-for-south-africa-42499">nuclear electricity</a> or <a href="http://www.saiia.org.za/opinion-analysis/south-africa-china-relations-evolving-cooperation-collaboration-and-competition">Chinese trade</a>, is the key objective and source of pride for Zuma. </p></li>
</ul>
<p>By applying a rational assessment of what the country could afford, Nene had become a “spoiler” for Zuma.</p>
<p>Zuma’s controversial statement that, in his eyes, the ANC <a href="http://www.timeslive.co.za/politics/2015/11/08/The-ANC-comes-first-not-the-country-Zuma">comes before</a> South Africa, set the tone. It is not unreasonable to extend this to mean that the ANC and the state provide him with a platform on which he can take decisions based on in his own interests, or those of his closest supporters.</p>
<p>Once a person believes that history is on his side he begins to believe that it legitimises his claim to the resources of the state. In Zuma’s case this became evident in his defence of the use of state resources to build his <a href="http://www.publicprotector.org/library%5Cinvestigation_report%5C2013-14%5CFinal%20Report%2019%20March%202014%20.pdf">Nkandla</a> homestead.</p>
<p>Any lack of co-operation by his ministers is regarded as opposition or even betrayal. Non-threatening ministers, such as the new finance minister, <a href="http://www.rdm.co.za/politics/2015/12/10/finance-minister-van-rooyen-was-chased-from-khutsong-by-community">David van Rooyen</a> and minerals minister <a href="http://www.bdlive.co.za/national/politics/2015/09/25/new-mineral-resources-minister-mosebenzi-zwane-riles-anc-industry">Mosebenzi Zwane</a>, are therefore logical choices.</p>
<h2>The end is in sight</h2>
<p>Zuma has lost control over who succeeds him as ANC president. This is evident from the fact that the union federation has passed a resolution backing Ramaphosa for the post. This has elevated someone who is outside the Zuma circle to the position of a real contender for power.</p>
<p>It means that the transition has already started and that Zuma could lose his hold on power by not having his favourite take charge. </p>
<p>A decline in ANC support in the local government elections next year will hasten that process. The ANC’s National Conference will follow <a href="http://www.rdm.co.za/politics/2014/10/20/how-the-battle-for-the-anc-leadership-in-2017-will-unfold">in 2017</a>, by which time it will be too late for him to turn the tide in his favour. </p>
<p>Ramaphosa’s increasing prominence will increase Zuma’s paranoia about who in his cabinet has already silently joined the Ramaphosa camp. A similar scenario unfolded ahead of the ANC’s Polokwane conference in 2007. That resulted in Zuma ousting Mbeki as ANC president, culminating in Mbeki being recalled as president of the country.</p>
<p>Speculation is rife that more ministers are in Zuma’s firing line. These include Trade and Industry Minister Rob Davies and Minister in the Presidency Jeff Radebe.</p>
<p>In effect, a silent rebellion is in the making. In the process most of the ANC’s internal democratic conventions, such as consultation, will be under pressure.</p>
<p>Nene’s dismissal heralds the beginning of a tumultuous period in the ANC.</p><img src="https://counter.theconversation.com/content/52161/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dirk Kotze does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>President Jacob Zuma’s era has been characterised by a high turnover, not only of cabinet members, but also senior public officials and executives in state-owned enterprises.Dirk Kotze, Professor in Political Science, University of South AfricaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/521802015-12-11T12:57:58Z2015-12-11T12:57:58ZZuma’s leadership: political expediency versus the interests of South Africa<figure><img src="https://images.theconversation.com/files/105486/original/image-20151211-8291-3tvb0q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">South Africa's Justice Sisi Khampepe swears in David van Rooyen as the new Minister of Finance while President Jacob Zuma looks on. </span> <span class="attribution"><span class="source">EPA/Elmond Jiyane</span></span></figcaption></figure><p><em>South African President Jacob Zuma’s <a href="http://www.thepresidency.gov.za/pebble.asp?relid=21217">decision</a> to replace a finance minister who was widely respected with someone who is unknown has raised questions about his political acuity as well as his style of leadership. Thabo Leshilo, politics editor of The Conversation Africa, asked Mashupye Herbert Maserumule and Danny Bradlow for their views on the issue.</em></p>
<p><strong>What does the president’s decision tell us about how he runs the country?</strong></p>
<p><em><strong>Mashupye Herbert Maserumule</strong></em>: The President cannot be faulted on <a href="http://www.gov.za/documents/constitution/constitution-republic-south-africa-1996-1">constitutional</a> grounds. He is empowered by the Constitution to decide on the composition of his cabinet. </p>
<p>But his decision appears to be strategically flawed. Nene had the kind of <a href="https://theconversation.com/the-removal-of-south-africas-finance-minister-is-bad-news-for-the-country-52170">leadership talent</a> the president needs in his cabinet. Simply removing him in the way he did raises a question about the strategic ingenuity of the decision and the need to build the capacity of the state.</p>
<p>The president’s decisions, particularly in key areas such as mining, and finance, are strange. This is particularly true given that some ministers he has moved had issues with people said to be <a href="http://www.dailymaverick.co.za/article/2015-12-09-editorial-an-act-of-willful-sabotage/#.VmqTYLiGSko">connected to him</a> in one way or another. An impression can easily be created that the president’s way of running the country has begun to border on vindictive leadership.</p>
<p>The fact that he did not consult the leadership of the ruling African National Congress <a href="http://www.anc.org.za/">(ANC)</a> about firing the finance minister raises interesting questions. Consulting the ANC is not prescribed in the Constitution. In the end, it does not matter what the ANC says. The composition of cabinet is the president’s call. If anything, consultation is about party political protocol, or mere courtesy.</p>
<p>Not consulting party headquarters does not necessarily make Zuma a liability to the country. He only becomes a liability when his decisions are at odds with what is in the public interest. </p>
<p>Perhaps the issue is the amount of power the Constitution assigns to him to make the decisions about his cabinet. This needs to be looked into seriously because it has profound implications for the quality of South Africa’s democracy and system of governance.</p>
<p><em><strong>Danny Bradlow</strong></em>: The failure to provide a convincing rationale for the firing and not to announce what Nene is doing next undermines confidence in governance in South Africa. It suggests that personal considerations rather than national interest are driving policy decisions. This will adversely affect South Africa’s international position. </p>
<p>This action by the President makes it hard not to be pessimistic about the South African government’s ability to manage the difficult challenges the country is likely to face next year. </p>
<p><strong>How do you explain Zuma’s decision given the fact that South Africa faces a challenging economic environment?</strong></p>
<p><em><strong>Mashupye Herbert Maserumule</strong></em>: The country is already being punished for the president’s decision. Rating agencies are <a href="http://www.bdlive.co.za/economy/2015/12/11/nene-sacking-triggers-closer-scrutiny-of-sa">poised</a> to downgrade it to junk status. In this instance the issue is not just about Nene’s removal, but the implications of who he has chosen as the <a href="http://www.fin24.com/Economy/meet-david-van-rooyen-the-man-who-must-fill-nenes-shoes-20151210">new finance minister</a>. </p>
<p>Questions are already asked. For example, does the market recognise him? Unfortunately the answer is: not yet. By removing Nene the president disrupted consistency of leadership succession in the <a href="http://www.treasury.gov.za/">National Treasury</a> which had been established successfully and meticulously over a period of time. </p>
<p><em><strong>Danny Bradlow</strong></em>: It is hard to think of a worse time to fire a finance minister who has been doing a very credible job under difficult circumstances.</p>
<p>In Africa, South Africa is increasingly being seen as relatively less reliable and important as an interlocutor. Other African countries are growing in power and prestige. For example the Chinese are paying increasing attention to East Africa and many states are paying more attention to Nigeria than they used to. </p>
<p>As a result, for the first time in many years, South Africa risks being seen as a relatively small, uninteresting country with diminished capacity to influence global affairs or the global economy. In other words, a country that does not matter.</p>
<p><strong>This is the seventh cabinet reshuffle the president has made since he came to office in 2009. He is <a href="http://www.news24.com/SouthAfrica/News/the-anc-comes-first-not-the-country-zuma-20151108">on record</a> as saying that the ANC, not the country, comes first. What do his appointments tell us about his priorities?</strong></p>
<p><em><strong>Mashupye Herbert Maserumule</strong></em>: The president’s appointments appear to be more inclined towards political expediency than the interests of the country. Cabinet reshuffles are normal. But if they are frequent they can have a destabilising effect on the administration of the state, especially if they are for vindictive reasons.</p>
<p>In these trying times South Africa desperately needs stability in government and political executive leadership of epic proportions, with unflinching commitment to good governance. </p>
<p><em><strong>Danny Bradlow</strong></em>: I think it is the most disturbing development in SA this year. It undermines confidence in the government’s commitment to prudent macro-economic policies and in its understanding of the gravity of the economic challenges facing SA.</p>
<p>The way in which it has been done sets the new minister up for failure regardless of his skills and qualifications. He now has to try and gain the confidence of all the relevant stakeholders including investors, business, labour, the country’s neighbours and trading partners. And he has to do this in a situation that is fraught with uncertainty and in which confidence in the authority of the Treasury is shaken and stakeholders have serious questions about the reasons for his appointment.</p><img src="https://counter.theconversation.com/content/52180/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mashupye Herbert Maserumule receives funding from National Research Foundation for my postgraduate studies. I am a member of the South African Association of Public Administration and Management(SAAPAM), including being a chief editor of its Journal. </span></em></p><p class="fine-print"><em><span>Danny Bradlow does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The sudden expulsion of the finance minister makes it hard not to be pessimistic about the South African government’s ability to manage the difficult challenges it might face in 2016.Mashupye Herbert Maserumule, Professor of Public Affairs, Tshwane University of TechnologyDanny Bradlow, SARCHI Professor of International Development Law and African Economic Relations, University of PretoriaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/521742015-12-10T14:31:24Z2015-12-10T14:31:24ZWhy Zuma’s actions point to shambolic management of South Africa’s economy<figure><img src="https://images.theconversation.com/files/105255/original/image-20151210-7428-2rwtc1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Nhlanhla Nene, South Africa's former finance minister. President Zuma's decision to fire him is irrational.</span> <span class="attribution"><span class="source">EPA/Nic Bothma</span></span></figcaption></figure><p>A fine technocrat who did not wear his position on his sleeve, and known for tapping into his soft power of persuasion, <a href="http://whoswho.co.za/nhlanhla-nene-7647">Nhlanhla Nene</a> has now been shunted out of South Africa’s National Treasury. </p>
<p>The man who was South Africa’s Finance Minister has been forced to make way for an obscure politician, David <a href="http://www.fin24.com/Economy/meet-david-van-rooyen-the-man-who-must-fill-nenes-shoes-20151210">van Rooyen</a>, who was on the backbenches of parliament.</p>
<p>There are very few things that are surprising about South African politics, in particular the president’s decisions. In 2012 a Constitutional Court <a href="http://www.saflii.org/za/cases/ZACC/2012/24.html">judgment</a> described a key appointment President Jacob Zuma had made in the justice ministry as “irrational”. Since then irrationality and Zuma have become synonymous.</p>
<p>One of the difficulties in analysing developments in South Africa is that political decision-making does not fit any neat theory in political science. The president is unpredictable. His policy thinking is woolly. </p>
<p>Zuma’s sense of South Africa’s political and economic vision is shrouded in destructive ambiguity. This helps him to consolidate his authority in the ruling party, but it weakens the country’s institutions.</p>
<h2>Nene’s legacy</h2>
<p>The decision to fire Nene as Finance Minister has shocked many. It immediately sent <a href="http://www.timeslive.co.za/thetimes/2015/12/10/Nene-axing-slays-rand">ripples</a> through the financial markets.</p>
<p>In understanding the president’s frame of mind it is important to remember that Zuma is not an institutionalist leader whose primary concern is to defend the country’s institutions and safeguard its economic well-being. It is a leap of faith to believe that a leader who has several times shown his inability to pronounce a figure of <a href="http://www.myvideo.co.za/lol/fails/jacob-zuma-tries-to-pronounce-939360000/">less than R1 billion</a> can preside over a R4 trillion economy and still appreciate its complexity.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/DClelfRo_Wg?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
</figure>
<p>Nene’s appointment as finance minister in 2014 was quickly welcomed by international markets. His technocratic flare and understanding of the country’s complex economic challenges endeared him to political parties across the spectrum. Before his appointment he had been chairperson of the portfolio committee on finance and then deputy finance minister.</p>
<p>During his tenure he reinforced the importance of macro-economic stability and prudential fiscal management. He announced a cap on government spending and made a commitment to rein in the <a href="http://www.iol.co.za/business/2.1742/sa-budget-deficit-to-widen-to-4-1-1.1769144#.VmlrUrh9600">budget deficit</a> which had grown to 4% of the GDP. </p>
<p>He spoke openly about the need to cap above-inflation <a href="http://www.financialmail.co.za/features/2015/10/21/treasury-will-have-to-wipe-out-contingency-reserve-to-fund-public-sector-wage-increases">wage increases</a> for public sector workers, even though he later conceded to their higher demands. He continued along the path set by his predecessor Pravin Gordhan, eliminating wasteful government spending. This included spelling out <a href="http://city-press.news24.com/News/treasury-says-no-no-no-to-luxury-festive-spending-20151121-2">limits to expenditure</a> on flights, hotels and entertainment.</p>
<h2>Why Nene was fired</h2>
<p>The crux of Nene’s fall is not easy to decipher. But two factors seem to have driven the final nail into his professional coffin.</p>
<p>The first has to do with his hard stance on the country’s state-owned airline, South African Airways. Nene <a href="http://mg.co.za/article/2015-09-17-saas-dudu-myeni-in-nenes-crosshairs">challenged</a> the board of the state-owned airline, led by Dudu Myeni, to reconsider its intended restructuring of a fleet arrangement with Airbus. The <a href="http://www.enca.com/south-africa/nene-says-no-saa-bid-renegotiate-airbus-deal">restructuring</a> would have had fiscal implications with the government being forced to make good on its guarantees.</p>
<p>Second, it is apparent that Zuma found the National Treasury, and Nene in particular, a stumbling block to a <a href="http://mg.co.za/article/2015-02-12-exposed-scary-details-of-secret-russian-nuke-deal">nuclear deal</a> the President is believed to have promised the Russians. It is estimated that the deal could cost as much as R1 trillion. Nene’s allocation of a mere R200m towards research for this programme must have been seen as an insult by Zuma’s cronies and insiders.</p>
<p>Zuma believes that this nuclear deal will be a magic bullet for South Africa’s urge to undertake industrialisation on a large scale, address energy deficits and create employment. He may turn out to be right on some of the outcomes, but the push to flout procurement rules and avoid accountability signifies a destruction of institutions.</p>
<p>The likely, and more menacing scenario, is deepening corruption. This is more so given Russia’s impoverished <a href="http://www.corporategovernancereport.com/corporate-social-responsibility/poor-governance-a-tax-on-russias-innovative-companies/">corporate governance</a> culture. The nuclear deal, if implemented, could create a feeding trough on a gigantic scale for cadres and cronies while acting as a debt albatross for future generations.</p>
<p>At the heart of both the South African Airways saga and the nuclear deal is the failure by the country’s leadership to adhere to accountability and transparency mechanisms, especially the <a href="http://www.treasury.gov.za/legislation/pfma/">Public Finance Management Act</a>, as well as to grasp the implications of irrational decision-making on the fiscus and the economy.</p>
<h2>A bad omen for South Africa</h2>
<p>The markets or economic actors are not familiar with Van Rooyen, Nene’s replacement at the helm of National Treasury. He clearly is someone Zuma considers malleable. The appointment itself was handled clumsily with no forewarning to the markets. This was a serious mistake given the strategic importance of National Treasury. The department stands at the nexus between the domestic economy and global markets.</p>
<p>What we can draw from these changes is that National Treasury has now lost its place of pride as a premier economic nerve centre for government. The cavalier manner in which Zuma has treated this crucial institution will have implications for the economy.</p>
<p>Investor confidence will be negatively affected, and trust in the ability of the ruling party to provide economic leadership severely eroded. Further, there will be a heightened sense of political risk, making it even harder to convince investors about South Africa’s profile as an investment destination.</p>
<p>The public debt, which is already hovering close to 50% of the <a href="http://www.bloomberg.com/news/articles/2014-10-22/south-africa-to-sacrifice-growth-to-skirt-risk-of-debt-trap-">GDP</a>, will balloon, with implications for fiscal sustainability in the future. Delivery of quality public services, public sector wages, and ability to modernise infrastructure will suffer further.</p>
<p>To hope for faster economic growth and job creation under such a scenario is a pipe dream.</p>
<p>What will get South Africa out of the quagmire is a revolt within the ruling African National Congress to challenge Zuma to explain himself and to provide a credible plan to reform and manage the economy. </p>
<p>Second, the local government elections due to be held in early 2016 should be a platform to rebuke government for its shambolic management of the economy.</p><img src="https://counter.theconversation.com/content/52174/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mzukisi Qobo does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>It is difficult to analyse political developments in South Africa. Decision-making does not fit any neat political science theory. President Zuma is unpredictable and his policy thinking is woolly.Mzukisi Qobo, Associate Professor at the Pan African Institute, University of JohannesburgLicensed as Creative Commons – attribution, no derivatives.