SA has just dodged a ratings downgrade by Moody’s following the agency’s latest assessment.
For South Africans who have been thoroughly depressed after all the political intrigues since December 2015, this has been very good news. This by no means signifies that 2016 is going to be great, but certainly there are some reasons for some comfort.
Firstly, US growth should be okay. Nothing more. It now seems likely that there will only be two US interest rate hikes this year and not four and that should be bad news for the US Dollar and good news for emerging market currencies, including the rand. The global commodities index has reached a 25 year low, but the fact that the oil price is back around the $40 mark indicates that there is some life out there. Commodity prices have responded accordingly and stock markets have followed in the direction of the oil price.
Granted, much of this is driven by artificial and unsustainable central bank economic life support. However, it’s better than nothing and if it helps in any way to rekindle some economic growth flames, it is to be welcomed.
It’s always important to remember, both in good, but particularly in bad economic times, that everything goes in cycles. The world will grow again, demand for commodities will return and, with a demographic pension time bomb approaching a yield-starved developed world, in which investors are currently receiving no return if they are lucky and, in the case of a third of euro-zone bonds, a negative yield, emerging market yield should eventually lure investors back . Already, emerging market outflows have turned flat, and in some cases even positive.
However, politically, we need to get our act together, and fast. The ratings agency threat is real. Very real. We should not be here. We find ourselves in this position through the unfortunate actions of a few who, as the finance minister puts it “are more interested in their personal business interests than those of the country”.
It is clear that five months after his appointment Minister Gordhan and President Zuma are in a covert battle, writes Carol Paton for the Business Day. Mr Zuma and his allies are digging in, bolstering their position wherever possible and popularising their narrative that Mr Zuma and the ANC are under threat from hostile quarters. Mr Gordhan too is on the offensive, exercising his authority wherever he can, regardless of how he might antagonise the President. He hopes to win the battle of ideas by persuading those within the ANC and society at large, that he is a force for good and a guardian of good governance and political morality. The state-owned enterprises are the battleground.
Under pressure, Mr Zuma said in February that the boards and management of a state enterprise should be fit for the purpose. But at SAA, he has blocked Mr Gordhan’s attempts to appoint a new board. Mr Zuma still wants his friend, Dudu Myeni on the board. Mr Gordhan refuses. The result is that neither a new board nor a chief executive can be appointed since the president has not given approval. In retaliation, Mr Gordhan refuses to provide SAA with a fresh government guarantee. SAA can therefore not finalise its 2015 financial statements and restructuring of debt cannot be finalised. There is a similar standoff at Denel. The board, instead of accepting Mr Gordhan’s authority and backing off from a venture which he has implied is illegal, has refused to budge. There is also a stalemate between SARS and Mr Gordhan. Mr Gordhan has asked the President to remove Commissioner Tom Moyane, but again he is being ignored. Mr Moyane is entrenched and continues to restructure SARS in a way that Mr Gordhan opposes. The retaliation from Mr Gordhan is to refuse to sign off on the SARS annual strategic plan.
To make life more difficult for Mr Gordhan, the ANC has shuffled its parliamentary pack, putting two Zuma allies into the portfolio finance committee, which exercises oversight over Mr Gordhan. While Mr Zuma has the support of the ANC’s NEC, much of the cabinet and the government bureaucrats behind him, Mr Gordhan is gathering a wider spread of supporters from civil society. His alliance with private sector CEO’s is potentially important. With Mr Gordhan boxed in on matters such as the SAA speculation is that it is possible, although by no means certain, that the CEO’s could help put the screws on Mr Zuma and unlock some blockages. Mr Gordhan as finance minister remains the key to prevent a downgrade in December.
Those with corrupt intentions are being exposed as never before, and daily their web of dirty deals is being unraveled. The momentum of those politicians looking to act in the interest of our country is growing and will hopefully soon overwhelm those who think otherwise. It has to. The alternative is too ghastly to contemplate. And we do not need a change of government. A dream cabinet can be established from the ANC cadre – it only needs the right people in the right positions.
Although a few swallows certainly do not make a summer, at least the rand has recovered from R17.78 to between R14 and R15 in a matter of months. There-fore 2016 might be slightly warmer than the original forecast indicated.
