On the Brink. Claire Bisseker
already in shreds, however, and the future clouded with uncertainty, it would take more than a hasty retraction from the Presidency to restore investor and business confidence.
‘It’s like choosing between black and red on a roulette table,’ sighed Rand Merchant Bank chief economist Ettienne le Roux at the time. ‘We could have a complete collapse in confidence or, if things turn around, complete euphoria – that’s how finely balanced this is. And what will corporates do in this environment? They won’t do anything – and that’s a problem.’34
The defensive behaviour of corporates was evident in their failure to invest in the economy despite many sitting on healthy cash surpluses. Private fixed investment contracted steadily during 2015 and 2016. This was the first time South Africa had experienced such a contraction (on a four-quarter rolling basis), outside of a global financial crisis, since 1994. Economists blamed the government’s policy incoherence and the increasingly uncertain political environment for this tortoise-like behaviour.
Even infrastructure investment by public corporations stalled during 2016. This hit manufacturing. The sector fell into a recession in the final six months of the year, exerting a further drag on the country’s overall growth rate, which slowed to just 0,3% for the year as a whole – South Africa’s worst performance since the 2009 recession.
The Bureau for Economic Research’s (BER) political constraint indicator35 showed that manufacturers’ perception of political risk during the latter part of 2016 was higher than at any time since 1993, with close to 80% of respondents citing the political climate as being a constraint on their business.
Business confidence was also deeply depressed. The RMB/BER business confidence index had been broadly tracking lower since hitting a peak of 55 index points in 2010. From then until the end of 2016, it remained in net negative terrain most of the time.
The dire state of the economy was completely eclipsed, however, by the country’s focus on two remarkable political events that occurred in the final quarter of 2016, three weeks apart.
Prosecutorial bungling as Gordhan is charged with fraud
The first, on 11 October, was NPA head Shaun Abrahams’s astonishing decision to charge Gordhan with two counts of fraud over the patently non-criminal act of approving an early-retirement package for former SARS commissioner Ivan Pillay. The move fuelled a national civic movement – the Save South Africa campaign – which rallied around everything Gordhan had come to represent: the strength of one man standing up to the playground bullies in defence of what was right.
Just under three weeks later, on 31 October, this extraordinary period culminated in Abrahams’s about-face when he buckled under public scrutiny and withdrew all the charges, conceding in a painfully convoluted press conference that the NPA had no prospect of achieving a successful prosecution. This was almost more bizarre than the NPA’s decision to charge Gordhan in the first place.
(The pompous bravado with which Abrahams had conducted himself made him a hot contender for the Sunday Times’s honorific, ‘Mampara of the year’, but he was narrowly beaten by the SABC’s Motsoeneng, who had the greater distinction of having run the public broadcaster into the ground.)
On 2 November, the day of Gordhan’s erstwhile court appearance on the NPA’s trumped-up fraud charges, protest marches against state capture as well as a church rally by the Save South Africa campaign went ahead in central Pretoria to press home society’s victory.
The second major event happened on the same day. Zuma withdrew his interdict against the release of the Public Protector’s State of Capture report. It hit the airwaves at 5 pm, skewering the president and his mandarins, the Guptas, as well as Eskom CEO, Brian Molefe, and reinforcing the sense that the good guys had won, if not the entire war, then certainly the most significant battle up to that point.
Had a national popularity vote been held on that day, Gordhan would have walked it. Admiration for the finance minister peaked a few weeks later on 2 December, when S&P maintained South Africa’s investment-grade sovereign credit rating, sparing the country a much-feared downgrade to junk status.
Gordhan emerged having survived several months of blatant political harassment and intense ratings pressure with his stature immeasurably enhanced. He had always been seen as an excellent administrator but it wasn’t until he was thrown into the ring with the Guptas that South Africans discovered the steel he was made of.36
Gordhan had succeeded in the most challenging of all cabinet positions without any of the usual support structures on which the position relies. Not only did he lack support from the very top, and the full cooperation of the tax authorities, he also had to fight a rearguard action against some cabinet colleagues while simultaneously battling arrest on dodgy fraud charges.
In this onslaught, Gordhan was helped by the outpouring of support he received from all corners of South African society. It meant that he was anything but a lonely figure. Even though he revealed the emotional toll his battle with the Hawks was taking, Gordhan was never the hapless victim. His dry sense of humour, professional rigour and ability to remain cool under pressure saw him receive standing ovations wherever he went – from book fairs to the National Assembly.
The main reason that South Africa managed to hang on to its investment-grade credit rating during 2016 was because the National Treasury had remained an impressive institution under a credible finance minister. Despite the political drama, it had ensured that the fiscal slippage caused by slowing growth remained manageable and that confidence in South Africa’s fiscal management remained intact.
But Gordhan did more than this. ‘He shone a spotlight into dark places in the public sector and parastatals,’ said Nomura strategist Peter Attard Montalto, ‘highlighting patronage and rent extraction.’37
Nor was he afraid to up the ante when required, like when he lashed Eskom for lying about cooperating with the Treasury’s investigation into its coal contracts with Gupta-owned Tegeta Resources, or when he deftly used his own court application to reveal billions of rands in suspicious banking transactions by Gupta companies. In all these ways, Gordhan won South Africa’s admiration.
So, when South Africans cheered the end of 2016 at midnight on 31 December it was as much to say goodbye to a horrible year as it was a chance to celebrate that Gordhan had survived it with his job intact. This victory raised hopes that the balance of power had shifted enough to make removing him politically impossible. Combined with signs of a cyclical improvement in the business environment, it also gave South Africa a glimmer of hope that the country and the economy had bottomed out, and that 2017 would be a slightly better year.
2 Checkmate
‘… over the past decade, many institutions have been forsaken or deliberately weakened for political expediency and state transformation has become so politicised that we would be forgiven for thinking that economics is all about political power.’
– Mcebisi Jonas1
Zuma burst onto the scene in the 2017 New Year promising that South Africa was entering ‘a new chapter of radical socio-economic transformation’ in which the government would use to the maximum all the levers at its disposal to drive the economic emancipation of black people.
His 2017 state-of-the-nation address was the antithesis of his 2016 speech. Whereas 12 months earlier, a seemingly contrite Zuma had affirmed the need for the whole country to unite behind the NDP to restore business confidence and investment, the Zuma of 2017 rallied his party behind an unapologetically populist message targeted at a completely different audience.
Radical socio-economic transformation meant changing the structure, institutions and patterns of ownership, management and control of the economy to break economic concentration that still resided in white business – and thus properly finish the anti-apartheid project, he said. The state would drive this process using legislation, regulations, licensing, the budget, public procurement as well as black economic empowerment (BEE) charters to the fullest extent possible.
The Black Business Council (BBC) could barely