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Rex Column                                                                                 5 April 2017

A slow fuse event    

by Cees Bruggemans          words 770

The shock, when it came last Thursday night, was not entirely unanticipated. For over a year rumour had been rife that Zuma would fire Gordhan. But timing was totally uncertain. In the event, on the flimsiest of grounds, and apparently for maximum embarrassing, shaming effect (a recall from an overseas investor roadshow), Zuma finally moved. But as if hiding the primary target among a bunch of sheep, some 20 ministers and deputy ministers were fired, too, the common link being public criticism/opposition to Zuma.

It was the kind of spectacle that reached the global news. It isn't every day that a President fires 20 ministers because they don't like them. What gave Zuma the right to do so? Just pausing the question showed the overseas ignorance about the SA make-up. And yet the Rand barely moved 100 cents in stages in response.

 

Markets, in other words, did not go into panic mode. There was a major pull back, only to go into watching mode. What next?

That turned out to be a knee jerk ratings downgrade to junk status by S&P, with Fitch likely next in the echo chamber. Moody's will also be upset, no doubt, but it is still three notches too high to get us to junk instantly (unless they pull out all stops….). They must regret by now having left us so elevated with such an obvious elephant in the room. And downside bias all around, of course, with extremely good reason while we are on our present path.

Beyond all this, on a higher elevated plane, are mainly various political games being played out on various levels of observation. On the Treasury side, the beady eye is on Gigaba as new finance minister, as to how quickly he can steer a new course regarding government contracts and major investment decisions, including nuclear. Though Gigaba may be moving fast, it might still appear to be slug-like, taking months or more to get major decisions to benefit intended beneficiaries.

In contrast, it is the political games that will probably play out much faster and really decide whether these recent Zuma actions will stand & their consequences follow through, or whether they will encounter defeat, possibly at various hands.

There is opposing action underway within the ruling Alliance and within the ANC, and there is action among the parliamentary opposition. The SACP communists have already publicly voiced their Zuma opposition, shortly thereafter followed by the Cosatu labour Union.

Within the ANC, the top-6 in the NEC (national executive committee) will probably take another look at the matter, supposedly divided 3-to-3, but nothing may remain what it seems, especially if reinforced by provincial leaders.

At the same time, there is an intricate dance involving the parliamentary speaker Mbete as to whether or not to allow a vote of no-confidence in a month’s time. So far a Zuma backer, she may deny such a motion but might also let it take place.

If it were to take place, at least 50 ANC members (out of 249) would have to vote against Zuma in an open ballot (where names can be taken and retribution more than likely). It is not supposed to be their tradition to vote against their leader, but then so much in recent years involving Zuma isn't supposed to be in their tradition either.

There may also be members who opt to abstain from voting, but that would require more than 50 ANC members to make a no-confidence vote succeed.

A no-vote may fail, in which case Zuma serenely sails on and Gigaba continues to lay his fiscal plans. If the no-confidence debate were to succeed, various things could happen. An interim president might be elected (Cyril), while the ANC is likely to bring forward its elective conference from December, to decide what it is to be. Not an issue that will be decided overnight, but where things really appear to be moving.

For ordinary South Africans on distant sidelines, the real question is whether imaginary “good” will win over “evil”.

Evil would see a systematic deterioration of state finances and institutions generally. It isn't an outcome that favours an improving economy. Instead, expect more plundering, on a scale so far not encountered.

If Good were to overcome evil, its outcome will likely seek a better balance of forces in society that may improve confidence and get things moving again. To what extent would be entirely dependable on who rules, what principles prevail, and what policies are favoured.

What did Kwame Nkrumah, the Ghanaian leader in the late 1950s claim again? “Get thee the political kingdom and all else will follow”.

Evil in our midst knows this rule only too well. Good will need to unite or fail spectacularly as the evil orgies gain in intensity

 

Cees Bruggemans

Bruggemans & Associates, Consulting Economists

 

Website  www.bruggemans.co.za

Email  This email address is being protected from spambots. You need JavaScript enabled to view it.

Twitter  @ceesbruggemans

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