On the Brink. Claire Bisseker
days later, on 12 April, Zuma’s 75th birthday, rival opposition parties together led thousands through Pretoria on a march to the Union Buildings demanding Zuma’s resignation under a sea of banners bearing the words ‘Zuma Must Fall’.
But back in the promising early days of 2016, all that drama and intrigue was still a long way off. Gordhan’s focus was on shoring up the economy, and not on the politics around his appointment. His immediate priority was to prevent South Africa from losing its investment-grade credit rating. This meant getting business on board and presenting a united front to the international investment community, as well as to the president.
‘We calmed markets down, we created a new sense of unity with business and labour, we won the ratings battles, we launched projects that were a concrete expression of that partnership and we would’ve done even greater things as the partnership progressed notwithstanding many contradictions between the principal players,’ said Gordhan. ‘The country would’ve benefitted from that.’12
With the president’s annual state-of-the-nation address scheduled for mid-January, Zuma needed to show after the debacle of Nenegate that he understood the country’s economic predicament and was committed to instituting business-friendly reforms to re-ignite growth.
He did both in a speech that appeared to have been penned by the National Treasury specifically around the needs of business. This was an indication of how significantly the balance of power had shifted in the few weeks post-9/12. The speech acknowledged that South Africa was at risk of losing its investment-grade status and required an effective turnaround plan.
‘It is about doing things differently and also acting on what may not have been acted upon quickly before,’ said Zuma before going on to promise action on a list of eight demands made by business, including that legislative and regulatory blockages to investment would be removed, that state-owned enterprises (SOEs) would be properly governed, and that the private sector would be given greater scope to partner with government in the provision of energy and other infrastructure.
Above all, business had stressed in its conversations with government the need for the country to unite behind South Africa’s long-term economic vision, the National Development Plan (NDP). Zuma assured the nation that government was not only implementing the NDP, but that all government’s programmes were now aligned with the document – a completely false assertion, as it turned out.
He called the plan the country’s ‘foremost blueprint’ and the ‘cornerstone of our economy’. It was, he said, the ‘basis for collective action to stabilise the economy, build confidence, raise the level of investment and return South Africa to a path of inclusive economic growth’.
But Zuma’s listless delivery was uninspiring. Having heard this kind of empty rhetoric before, the markets were not convinced. The rand remained extremely weak, having plummeted to a worst-ever level of R16,89/$ on 20 January 2016, while financial markets continued to price South Africa’s credit risk on a par with Russia’s and even worse than Turkey’s – two junk-rated countries.
Gordhan managed to prop up the country’s savaged credibility a few weeks later with a national budget that did a great deal more to rein in debt than previously. This was a clear bid to reassure a sceptical audience that South Africa’s commitment to fiscal discipline had not wavered. It was well received, but what the investment community really needed to see was that South Africa had an actionable plan to get growth going. What was still missing was a list of specific pro-growth reforms and a timetable for their implementation.
Raising the nation’s flag: Team South Africa
Immediately after his appointment, Gordhan put together a working group of chief executives from South Africa’s listed companies to help him address South Africa’s economic crisis.
Recalling their first meeting, which Gordhan convened at the Nedbank offices, with more than 60 CEOs, Discovery Group CEO Adrian Gore said, ‘The message wasn’t about politics ... it was all positive. It was brainstorming with government about how we build the country.’13
Several CEOs subsequently toured with Gordhan on roadshows to London and New York, selling the idea that under the united banner of Team South Africa, the country had got its act together and would do whatever it took to prevent further credit-rating downgrades.
‘Every crisis has a silver lining,’ said Nene. ‘In this case it was that the lack of trust between business and government was put much higher on the agenda with the full understanding that if this ship sinks, we all sink together.’
It appeared as if South Africa had made more progress on economic-policy reform in a few short months than in the preceding five years. It looked like business and government had finally begun to have a real conversation about how to tackle the fundamental shortcomings of the South African economy. And it seemed that, for the first time, the government was actually listening.
‘It was a watershed moment in a tired and resentful marriage in which both partners have given up trying to save the relationship and [have] simply been going through the motions for years,’ observed the Financial Mail.14
Commentators began speculating that Gordhan had, through his bold, decisive leadership, allowed the National Treasury to regain some of its former stature within government. The expectation was that, since he could hardly be fired now, he would make rapid headway on politically tough reforms, liberalising the labour market and hauling into line delinquent SOEs, like the South African Broadcasting Corporation (SABC) and SAA.
After all, to get the economy growing, it had become imperative that the government take politically unpopular decisions. These meant cracking the whip on government underperformance in all spheres. None more so than among those SOEs whose boards were stuffed with Gupta associates and offered sheltered employment to a few of Zuma’s close friends. Senior executives seldom lasted more than a few months under the weight of political interference. (SABC CEO James Aguma, appointed in July 2016, was the national broadcaster’s seventh in as many years.)
More than piecemeal reforms were required, however. With growth having slowed to a crawl, it was clear that government had to change its whole approach to managing the economy. What South Africa needed was less government inefficiency, less economic and institutional mismanagement and a more business-friendly environment characterised by deregulation and greater policy certainty.
In essence, the state-led development model was crumbling through the state’s inefficiency and incapacity. It had become clear to many that South Africa’s best shot at raising the growth rate was to give the private sector a bigger role in government’s traditional terrain, including providing infrastructure and helping run SOEs. The objective was to raise the economy’s competitiveness and reduce the funding burden on the fiscus.
‘We’ve got to change the way the ANC thinks about the economy,’ said Old Mutual Investment Group’s chief economist, Rian le Roux. ‘We need a mind shift, a fundamental change of heart from a government-must-do-it-all approach to [one which understands that] we don’t need an SAA, we must sell underperforming SOEs, and we must allow the private sector to get involved in education, in power generation and so on.’15
This was the path the Treasury had begun to lead South Africa down in partnership with business and a smattering of labour representatives under the Team South Africa outfit. But, for the tenderpreneurs allied to Zuma, this challenge to the status quo threatened to end the opportunities for rent-seeking, which had served their interests so well.
Initially, Zuma was on the back foot as a result of his forced climbdown over Nenegate, which was followed in quick succession by two serious court defeats. The first was the Constitutional Court’s momentous finding on 31 March 2016 that the president had flouted the Constitution over his failure to submit to the Public Protector’s order that he pay back some of the R246 million of taxpayers’ money spent on ‘security upgrades’ to his private rural homestead, Nkandla.
Zuma had spent the previous two years refusing to pay, despite the Public Protector’s finding that he had unduly benefited from the improvements. These included a cattle kraal, visitors’