On the Brink. Claire Bisseker
an interview with the author, Manuel marvelled over the government’s apparent belief that it could get away with anything. ‘Take the issue of Hlaudi and the SABC, or the most recent example of corporate anti-governance to emerge from SAA in relation to the capital-raising contract given to BnP,’ he said. ‘How are we too thick not to notice? Will our whinging have no consequences?’31
The 2016 local election: A watershed moment
As it turned out, it did have consequences – as the ANC found out to its cost in the August 2016 local-government elections.
The ANC’s national majority declined from 64,8% in 2006 to 62% in 2011 and fell even further to 54% in 2016 – something unthinkable only a few years before. Unthinkable certainly to Zuma, who had once famously asserted that the ANC would rule ‘until Jesus comes’.
As a result of the ANC’s disastrous election performance, it lost power in three key metros – Nelson Mandela Bay, Johannesburg and Tshwane. Like Cape Town had earlier, these cities fell into the hands of Democratic Alliance (DA) mayors, giving the opposition control over a budget of more than R130 billion.
Commenting on the results, the DA Premier Helen Zille said, ‘Despite the polarisation, all the race-baiting, all the intolerance that has been shown in our country over the past year, the people spoke and said they want a united, non-racial, shared future, and that is enormously powerful.’
The political outlook had changed from ‘catastrophic to mildly optimistic’, agreed political scientist Professor Gerrit Olivier of the University of Pretoria. ‘It turns out that democracy is alive and well, and that civil society remains a formidable countervailing force against government fiat and mismanagement.’32
Cheered by this interpretation, the markets rewarded South Africa. The rand strengthened to R13,30/$ during the week of the election, taking it back to where it was well before Nenegate. It also broke through the key psychological levels of R17 to the euro and R21 to the pound, buoyed partly by a surge of risk appetite that favoured emerging markets as a whole.
‘The ANC deserved to lose, not only for its own sake but so that sanity and decency may be restored in our public life,’ wrote Sunday Times columnist Barney Mthombothi. ‘Parties should know there are consequences if they misbehave, and voters should not be shy to punish those who step out of line.’33
Scorn was heaped, though, on the ANC when it failed to acknowledge Zuma’s role in the party’s election drubbing, with all the main opposition parties firmly rejecting its attempts to form coalitions to govern the three lost metros.
‘The party deserves the animus it’s getting,’ added Mthombothi, ‘Its arrogance has become unbearable and is, in fact, at the core of the incompetence and corruption that have reduced the government to a laughing stock.’
And yet, despite the fact that the election outcome was a significant step towards the consolidation of democracy in South Africa, the response from the ANC suggested that it would do very little to advance economic reform and progress.
Instead of moving swiftly to remove Zuma and call an early electoral congress to elect a new leadership and chart a new course for the ANC ahead of the 2019 elections, the ANC’s National Executive Committee (NEC) resolved after a ‘vigorous, honest, open and thorough assessment of the local government election outcomes’ to shield Zuma from culpability. It went on to call (without any apparent sense of irony) for a fresh approach that would deal with the ‘cancer of corruption, without fear or favour’.
‘I actually burst out laughing when I saw this,’ revealed an international credit-ratings analyst in an unguarded moment with the author.
For how on earth did the ANC think it would confront the deep-seated problems of corruption, cadre deployment and state capture as long as Zuma remained in the Union Buildings as the epitome of these problems?
The Hawks escalate their campaign against Gordhan
Indeed, no sooner had the dust settled on the elections than the Hawks shocked the nation by ramping up their campaign against Gordhan. They ordered the minister, as well as two former SARS officials, to report to their offices for warning statements – usually a prelude to being formally charged.
The market reaction was swift‚ with banking stocks and the rand both down 4% within 24 hours of the announcement as investors reacted defensively to what was clearly a major intensification of the ‘SARS wars’, as the row over the SARS rogue unit had become known.
As rumours swirled that Gordhan would be arrested within a week, a fightback campaign began to coalesce rapidly with civil-society organisations, academic economists, business, opposition parties and ANC stalwarts all expressing outrage that Gordhan and the National Treasury were once again under attack.
Over the ensuing months, the dial on the national psyche would swing from despair to euphoria and back again as the two camps – those allied to Zuma and those opposed to his continued grip on power – continued to trade blows. Ultimately, though, the economy would pay the price. Over the course of 2015 and 2016, the country’s self-destructive politics, combined with cyclical shocks (including the worst drought in 50 years), exerted a severe drag on growth. By the end of 2016, economic activity had slowed to a crawl, with fixed investment mired in recession and business confidence deeply depressed.
Making headlines during the final fraught months of 2016 was the decision by Futuregrowth, South Africa’s largest local bond fund manager, to pull the plug on funding proposals worth nearly R2 billion to two SOEs due to governance concerns and to stop lending to six others (see Chapter 3 for more). The Zuma-aligned camp also became more outspoken during this period.
On 1 September, mineral resources minister and Gupta apologist Mosebenzi Zwane called for a judicial inquiry into the banking sector, the Reserve Bank and the National Treasury’s conduct towards Gupta-owned companies. It would include a review of the process whereby new banking licences were issued.
Zwane had coordinated a cabinet inter-ministerial committee investigation into whether certain financial institutions had acted improperly when they closed bank accounts or terminated contractual relationships with the Gupta’s company, Oakbay Investments.
His committee concluded that ‘all of the actions taken by the banks and financial institutions were as a result of innuendo and potentially reckless media statements’ – leaving Oakbay with little recourse to the law. And by failing to protect Oakbay, the Treasury was part of the problem, it implied.
The Economic Freedom Fighters (EFF) were incredulous. ‘If there is a family that should be investigated and subjected to a judicial commission of inquiry‚ it is the parasitic and corrupt Gupta family‚ which continues to callously loot South African government resources‚’ the party said in a statement.
Gordhan countered Zwane’s play with a more explosive one of his own. He instituted a court application seeking an order affirming his view that no finance minister could be compelled to intervene in the professional relationship between South Africa’s banks and their private clients. As part of his submission, Gordhan revealed that the Finance Intelligence Centre had flagged 72 suspicious transactions worth R6,8 billion by Gupta companies, giving the lie to Zwane’s conclusion that the banks’ behaviour had been unfair and unwarranted. Oakbay Investments CEO Nazeem Howa resigned days later, citing health reasons.
But even before Gordhan’s counter-move, Zuma had hit the retreat button, issuing a remarkable statement saying the Presidency ‘deeply regretted’ the ‘unfortunate contents’ of Zwane’s cabinet statement. Zuma denied that Zwane’s statement reflected the views of the cabinet, the Presidency or the government. In fact, he said, it didn’t even reflect the views of Zwane’s own task team, of which Gordhan was a most reluctant member.
‘The Presidency wishes to assure the public, the banking sector as well as domestic and international investors of government’s unwavering commitment to the letter and spirit of the country’s Constitution as well as in the sound fiscal and economic fundamentals that underpin our economy,’ Zuma’s