‘Both Zuma senior and junior are well-known critics of the rating agencies that determine the credit status of the country’
Tomorrow Cape Town traffic will be more choked and chaotic than usual as the state flexes its muscles and shows its pomp and finery for President Jacob Zuma‘s State of the Nation spectacle.
The street theatre outside might be more interesting, in fact, than the events inside.
But if (not a big ask) you can tear your eyes away from Zuma’s speech and his menu of offerings for 2017, take a look when the TV camera pans to the face of Finance Minister Pravin Gordhan.
Our redoubtable minister does not wear his anguished heart on his sleeve. And presumably, since the president is not insane, Gordhan will survive in office for at least another 13 days before he steps up to the same podium to deliver the budget to parliament.
But thereafter, as we say in racing, all bets are off.
There are three essential views on Gordhan’s future:
First, that he will be replaced to make way for a more tractable successor — someone who will not guard the fiscal purse or stave off a credit downgrade, and will allow the president and his playmates to indulge further their nefarious schemes for personal and crony enrichment, regardless of the financial or economic consequences.
Second, Gordhan will be kept in place but essentially reduced to the role of state bookkeeper. It is perfectly true, to sustain the racing metaphor, that Whisky Baron won the 2017 Sun Met after being gelded. But a neutered finance minister, unable to make the bold calls and policy reforms required to stave off a credit downgrade and uplift our pathetic rate of growth above 0.5%, is another matter entirely.
Third, Zuma is dead keen to be rid of independent-minded Gordhan but he lacks the political power, rather than the constitutional ability, to do so.
Of this option, there is often reference to Zuma’s ability as a chess player, always ready with a sharp stratagem to unsettle the board. But there is also a position in chess known as zugzwang. Here the player has to make a move but there is no good one to make.
On this thesis, Zuma wants to strike but equally fears the blowback against him and his preferred successor, namely his former wife, if he unsettles the party nest.
But on Zuma family matters, just think of the son as the outlier for the dad. On Friday, Edward Zuma gave vent to what presumably the vast Zuma family actually thinks about the finance minister.
He said, in an open letter, that Gordhan — about whom the whiff of real scandal has never settled after two decades of public service — was front and centre of a share-owning scheme and wanted to sell SAA to “a relative”.
Both Zuma senior and junior are well-known critics of the rating agencies that determine the credit status of the country.
Last year, Zuma senior suggested it made no difference whether or not we were down-rated. On Friday, Zuma junior decried what he termed the “un-progressive and questionable rating agencies”.
Talk about how not to win friends and influence the people who matter in the rather large matter of whether this country remains on its precarious current path of national solvency or plunges off the debt mountain, from which it never recovers.
Gordhan understands all that and also that he must, in conditions of low growth and high debt, somehow in late February find another R30-billion to plug the hole in state finances just to keep the current show on the road. Taxpayers had better hang onto their wallets, which will doubtless be pillaged.
He also knows, as the Zuma family either does not, or cares not to find out, just what it would mean if we were later this year to be downgraded to junk status.
This was well spelt out recently by Nedbank economist Nicky Weimar. She has a very useful surname: in the 1930s, to which Donald Trump‘s protectionism could return the world, the Weimar Republic in Germany became the centre of an overburdened state with runaway inflation. And we know what regime followed.
Weimar offered this snapshot of our downgraded future:
“Since around 40% of foreign investment in the country relates to long-term investment funds which cannot invest in junk-status countries, about R600-billion will flow out of South Africa if the country is downgraded to junk status.”
As she elaborates, this will severely constrict the ability of both business and the government to operate. The government will have to find other and more volatile sources of finance and its debt service costs will start to explode and impair its ability to “fund social and economic priorities and even pay its civil servants”.
Onto this grim but accurate picture can be added the fact that, even without a downgrade, repaying our R2-trillion current debt is now the fastest-growing single item in the budget. With a downgrade it will go off the charts.
Last year, when Zuma pooh-poohed concerns about a downgrade, Financial Mail editor Rob Rose compared him to the mascot of Mad magazine, Alfred E Neuman, an icon from my 1960s youth, who rejoiced in the motto “What, me worry?”.
But there is a world of difference between the fictitious mascot of a magazine for kids and running a modern industrial economy. Nonchalance is not an option.
Doubtless, Zuma‘s script tomorrow will contain doses of warmed-up recipes from the old cookbook of the “development state” and lashings of warnings against the evils of “white monopoly capital”.
What he will not do is accept responsibility for the halving of the growth rate, the doubling of the debt, and the catastrophe of unemployment now nudging towards nine million work-ready, jobless South Africans.
He will probably find a better choice of word than “welcoming” — the word his office used to announce its receipt of the medical ombudsman‘s devastating report that detailed how 94 mental patients died of neglect courtesy of the Gauteng government.
The state of the state is dire, if not the nation itself. Honest accounting, and retaining rare ministerial talent to steer it away from the collision course with an iceberg set by the presidency, is a much-needed correction.
Just don’t expect it in tomorrow‘s speech.
• Leon, a former leader of the opposition in SA, now chairs Resolve Communications and is a senior adviser to K2 Intelligence of London. @TonyLeonSA
