When things go wrong it is very easy to blame someone else. This week Finance Minister, Pravin Gordhan, blew the lid off “suspicious and unusual transactions” linked to the Guptas to the tune of R6.8 billion, and perhaps what’s to follow will in all likelihood be proof of how much this has unduly benefitted financially from relationships with those in power, particularly President Zuma.
With whispers in the corridors of power on State Capture and the impending release of the report on the matter, pending court battles; the creditworthy status of our country hanging in the balance and prices of everything from electricity to food on the rise it’s hard not blaming President Zuma for this mess.
But Dr Azar Jammine, chief economist at Econometrics, argues that President Jacob Zuma cannot be blamed for all of South Africa’s financial problems. While President Zuma and other members of Parliament have often cited outside forces at play that have a direct and indirect impact on our economy, they do – well and truly – exist. So while you’d like to blame President Zuma for the fact that you don’t know how you’ll afford the next round of groceries it’s not realistic to put it all squarely on his shoulders.
“There are two main reasons why I say that. The first is that there is a strong correlation between South Africa’s economy and the rest of the world. According to my calculations, at least half of the economic slowdown in South Africa has resulted from a weakening in the world economy over the last six years. In fact you must bear in mind also that President Zuma took over the reigns as president straight after the global financial recession,” said Jammine.
With regards to this, you need to also consider the Rand exchange rate. Jammine highlighted that the Rand is currently stronger than it was before President Zuma removed Nhlanhla Nene from the position of finance minister in December last year. According to Jammine, this indicates that there have been other factors influencing the country’s economy.
He added: “The second factor is that you can’t blame him for the drought and one should not under estimate the impact that the drought has had is depressing economic activity.”
Blame must fall where it is due
However, while Zuma cannot be blamed for everything, Jammine noted that there are things that Zuma does influence with regards to the economy.
The issue of state capture is a vital issue with regards to this. While the Public Protector report is yet to be released, just this past weekend, Finance Minister Pravin Gordhan released information pertaining to the Gupta family and the removal of R6.8 billion from South Africa, reportedly without proper approval.
Jammine revealed that there is fear among international investors that Zuma “and his cronies are likely to grab power from National Treasury in order to enrich themselves by organising deals relating to state owned enterprises that are being opposed by the likes of Pravin Gordhan and the Treasury as a whole. Were that to happen, then South Africa’s reputation as a bastion of fiscal rectitude, or at least Treasury’s reputation as a bastion of fiscal rectitude would fall away and the country would receive credit ratings downgrades, significant ones, which in turn would cause the Rand to plummet, capital to leave the country, inflation to soar and interest rates to rise strongly, depressing economic growth.”
The interdict against the release of the Public Protector’s state capture report, highlights the danger that international investors perceive in Zuma grabbing hold of power, according to Jammine. The court summons against Gordhan in relation to charges of fraud is important, especially the issue of whether or not he will be replaced as Minister of Finance. Jammine noted that this may be used as an excuse to remove Gordhan from office.
Other factors impacting the economy
Besides the ongoing drought and the state capture probe, there are a number of local and international issues that are impacting South Africa’s economy, many of which cannot be blamed on Zuma.
There are also several international events that have impacted the South African economy. Brexit, according to Jammine, is a case in point. In addition, the migrant crisis in Europe is also a contributing factor.
“The factors that contribute towards the migrant crisis, influencing world economy, actually influence South Africa as well. By keeping interest rates low for longer internationally, financial asset prices have been booming, and that means that people who have financial assets have been doing very well, but the majority of people are not that fortunate, and so you’ve seen a rise in inequality, and it’s that rise in inequality where the ordinary man in the street feels that he’s been losing out. He is not benefiting from the interest rate. And as a result you have had increased pressures for protection, and protection has led to protection against xenophobia and the rise of Donald Trump, and the desire of the British to leave the EU etc.,” explained Jammine.
Jammine claims that the #FeesMustFall movement is also not Zuma's fault. He emphasised that one of the weaknesses of the South African economy is the last of decent skills and outcomes from the educational system.
“By impairing the throughput of students to become skilled workers in South Africa, the longer term impact is likely to be very severe. We could also see an outflow of professors and skilled academics from the country, who don’t want to put up with this type of nonsense anymore,” said Jammine.
Furthermore, he does not believe that free education is feasible. He stressed that the first step in this debate is defining what you mean by free education. Will this be free tuition fees only, or will residence costs and food be included?
“Secondly, at a time when we are trying to cut down on all government spending, in order to avoid being downgraded, I think it is ridiculous to believe that government can suddenly in one fowl swoop switch four percent of its expenditure to finance free education. What about welfare programmes, what about housing, what about healthcare and the like?” added Jammine.
Despite how much you may want to blame the president for everything that is wrong in the country (and even your everyday life) unfortunately there are things that even he can’t control because it ultimately goes way beyond any power he may wield.
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