What Are The Economic Consequences Of Zuma Firing His Finance Minister?
Most people never heard of former South African Finance Minister, Nhlanhla Nene, outside of government financial circles before today.
Now headlines all over the world are questioning South African President Jacob Zuma’s leadership, judgement and timing in firing him.
Zuma’s action has generated almost unprecedented media interest. Everyone is weighing in.
Here’s a look at some of the headlines:
Forbes implied South Africa is dragging down its biggest trade partners with this headline: “The BRICS Continue To Crumble As The South African President Axes His Finance Minister”
Even though an ‘S’ for South Africa was added in 2010, it’s only now, with the BRICs crumbling, that South Africa seems aligned with those former hotspots for international investors,” Laurie Laird wrote for Forbes. And, like Brazil and Russia, the bulk of South Africa’s economic woes stem from questionable political leadership.”
Many investors fear that Zuma may be eyeing a government grab of private assets, particularly after the announcement of large-scale layoffs from struggling mining companies. After Anglo-American unveiled a debt reduction package that could axe some 65,000 jobs, the bulk in South Africa, Zuma could be even warier of trusting South Africa’s future to the capricious private sector.
In an editorial, TheGuardian said its “View on Jacob Zuma’s economics: not prudent, and a danger for the future”
There seems little reason to doubt that Mr Nene has been removed because he opposed spending proposals, like those for a new nuclear power station, for supporting a new aircraft leasing deal for South African Airways, and for pay increases for workers, which Mr Zuma wanted to push through. The minister’s view was that South Africa, already deep in debt, simply could not afford them.
The more fundamental problem is that Mr Zuma understands patronage very well, but seems to have no economic strategy at all. He has packed government departments, other state institutions, and the wholly or partly state-owned companies that have proliferated in South Africa, with people who owe him loyalty in return for the well-paid positions that have come their way.
These people, his critics say, will protect him in the future, after he stands down as president in 2019, from the criminal charges that still hang over him, and enable him to remain a power in the land even after he loses formal office.
Fortune‘s headline tells about “How South Africa’s President Just Scared Investors”
Even some supporters of the African National Congress, Nelson Mandela’s erstwhile liberation movement that has ruled since the end of apartheid in 1994, expressed dismay about Wednesday’s appointment of a Zuma loyalist to the crucial post…Markets reacted unambiguously.
The ANC said in a statement it “notes and respects” the president’s decision…Nene’s removal has raised speculation about more casualties within Zuma’s team, after the axing in September of mining minister Ngoako Ramatlhodi, who investors said had done a decent job in a tough but crucial portfolio.
The GulfNews headline just underlined the lack of transparency in Zuma’s action: “South Africa taps unknown quantity to run finance ministry”
FinancialTimes talked about the “Zuma backlash over sacking of minister”
The Treasury has long been regarded as one of the country’s most credible institutions and economists warn that the intervention will damage its reputation.
Some market economists believe the rand — one of the most traded emerging market currencies — may come under increased pressure with any US interest rate rise this month.
“It is common knowledge that Nhlanhla Nene sought to rein in excessive government spending and was causing too much of a blockage for president Zuma in respect of the nuclear procurement deal and SAA,” said the Democratic Alliance, the main opposition.
“President Zuma has made one thing very clear tonight: if you stand in my way as finance minister and seek to introduce fiscal prudence, you will find yourself redeployed and cast aside.”