Malema and the black swan moment

Malema and the black swan moment

“Finance minister Pravin Gordhan, stands like Horatio on the bridge trying to hold back the ratings agencies”

A FRIEND of mine in London sent me an amazing betting statistic. If you had wagered a paltry £5 on a trifecta of Leicester City winning the Premier League in May, Britain voting for Brexit in June and Americans electing Donald

Trump president last week, you would have won a staggering £13.5-million.

So unlikely were these seismic shocks that practically no one saw any of this coming. The pundit Nassim Nicholas Taleb, nine years ago, achieved fame and fortune with his “Black Swan” thesis, events of low probability but of devastating impact. The waters of the world are crowded with these once rare creatures.

Not that South Africa has been devoid of such sightings either: who would have bet that last December we would run through three finance ministers in just four days?

More recently, the admired old-new finance minister Pravin Gordhan, stands like Horatio on the bridge trying to hold back the ratings agencies armed with their lethal downgrade-axes. Who would have bet that he would be charged with crimes by an agency of the same state whose reputation and resources he desperately defends?

Seventy days before Trump even sets foot in the Oval Office, his improbable win is having a “WHUUGE” (Trumpism for “huge”) effect on financial markets everywhere, not least our own.

Never mind the black swans, what about the “perfect storm”, to borrow from an unlikely meteorological event which leaves destruction in its path? South Africa, with its relatively small economy but with a globally traded currency, sits in the middle of the blizzards unleashed by the weather change in Washington. And this has nothing to do with Trump‘s views on Africa (unknown) or on whether or not he will unleash a trade war on us and the world.

Rather, it is because emerging markets are suffering a sell-off in stocks and bonds (on which our yield now touches a record 9%) as financial markets expect Trump to tax, cut, spend and inflate his way to political happiness. This means that old economies will see new growth, more investment and rising interest rates. Since US stocks have risen on the back of this expectation, much of the hot money is leaving risky shores such as our own and heading back to safer, higher-growth countries like the US.

If we are hit with one, two or, catastrophically, three credit downgrades in the next few months, all bets are off on how we will navigate through the storm. We rely on foreign capital to prop up our high fiscal deficit (or the budget gap between declining local tax revenues and government spending) and our battered currency fell another 1% last Friday. Investors are — in the words of the Wall Street Journal — “dumping assets in emerging markets”. And this is before any downgrade of our sovereign debt.

As Peter Bruce wrote in the Sunday Times on Sunday: “That debt now stands at R2-trillion and the interest we pay on it costs around R540-million every working day.”

Paying off that debt is the biggest single item of the current budget and consumes 12c of each rand in government coffers. With a downgrade, we can expect that to double. No space then for any fancy plans of government, from national health to nuclear.

Enough of the serious stuff, or else readers will be forced to imbibe some very early Christmas cheer, assuming Trade and Industry Minister Rob Davies doesn‘t ban our booze consumption before then.

Another friend, historian Niall Ferguson gave an apparently riveting address on Monday at the Discovery leadership shindig in Sandton. He spoke of the rise of populism everywhere and how the perfect conditions here make the chances of our own home-grown populist winning power more likely than ever.

But the US presidential election set me thinking how, in fact, there is a little or a lot of Trump in our own political gang, even those who are utterly opposed to his ideology, to the extent he has one.

The obvious candidate is Julius Malema. He trades in Trump-like hatred (though his targets are very different) and rouses his audience with incendiary words. But there are, at the least, two essential differences. Trump‘s populism provided a winning ticket to the White House. Malema is a rather unpopular populist. In the August election, he didn‘t get beyond 8%, incidentally the exact score that Trump received from African Americans. Indeed, Trump having declared some Mexican immigrants “rapists”, managed to win one quarter of the Latino vote. Malema‘s ceiling does not include any minority support here, and only a sliver from the majority. Of course, all this can change, especially in the face of an ever weakening ruling party.

This then brings us to Number One or Jacob Zuma. There‘s a lot of Trumpism in our president: a casual disregard for the constitution, and a joint “bromance” with Russian strongman Vladimir Putin to name but two. Indeed, the august Financial Times speculated on the weekend that Putin has “hidden leverage over Trump” in the form “of debts to Russian sources that keep his business empire afloat”. Exactly the same has been said of Zuma and hidden debts to Russian nuclear.

Then there‘s the fact that both of these men have been accused of sexual assault, and, of course, the lawsuits. Zuma is still ducking and diving over the 783 corruption charges. In two weeks‘ time, Trump will be defending a $40-million lawsuit brought by students of Trump University who claim — less serious than Number One‘s looming charges — that they were deceived by its marketing. But, like Zuma, he also faces other charges relating to racketeering, as well as fraud relating to the same enterprise.

Trump, of course, also traffics in fact-free conspiracy theories. His two most infamous were that US President Barack Obama was not born in the US and that the father of his Republican rival Senator Ted Cruz consorted with Kennedy assassin Lee Harvey Oswald.

Step forward into this space locally our very own Malusi Gigaba. In a speech of utter paranoia in parliament last week, this minister channelled his inner Trump. He ranted on about “abhorrent ploys by the global empire and their local political hoodlums” (the DA).

Alas, as our beleaguered financial position indicates, the “global empire” is rapidly losing interest in us.

Mind you, there are two elements of Trump on the opposition side as well. Johannesburg mayor Herman Mashaba shares Trump‘s faith in capitalism and also the fact that before entering political office his entire background was in business.

But as Trump has already signalled, sometimes even the most pro-business views have to yield to political necessities, however strong the desire to “drain the swamp”.

Interesting days ahead — here, there and everywhere. Cheers!

The Times

 

By |2016-11-16T11:58:31+00:00November 16th, 2016|Donald Trump, Julius Malema, Pravin Gordhan, South African Politics|0 Comments

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