Malala and Gracey: A user’s guide to what the beep is going on in South Africa

One day an exposed Gupta puppet resigns in tears. Not long afterwards he’s smiling again as the ruling political party appoints him as one of the country’s leaders who meet in Parliament. Not long afterwards he is sent back to run the country’s sole supplier of electricity. A few days later he is once again ejected from Eskom’s corner office. And that’s just one of the characters in South Africa’s outrageous political soap opera. If you’re confused, don’t feel alone. Thankfully, there is always Justice Malala to offer some logic out of all the nonsense. As he did in this exclusive webinar with Investec’s head of forex operations David Gracey. Recorded exclusively for the bank’s clients, Investec has kindly agreed to let us republish. Enjoy. – Alec Hogg

Hello everyone, this is Justice Malala, I’m a political commentator. Thanks for joining us on this Investec Insights Webinar. We’re going to talk about recent events, what transpired with the reshuffle, with the currency, what happens now with our economy. I’m with David Gracey from Investec and we’re just going to take you through some of our thoughts. We urge you to, just right there under the camera, under the picture you’re looking at, to submit your questions and we’ll do our best to answer them under the circumstances. Shall I start?

Please Justice; maybe can you give us your view on what’s transpired recently on the political arena?

Yes it’s been exciting days, but I think firstly we were expecting this, since the firing of Nhlanhla Nene, the hiring of Des van Rooyen and then the firing of Des van Rooyen and the hiring of Pravin Gordhan, it’s been very clear that President Zuma was not keen on his new finance minister and the problems that arose after that. You’ll remember February last year in the budget speech there were questions sent by the Hawks to the Finance Minister. Then you had the bogus charges against him later on in the year in October, those were withdrawn and that relationship has been going south all along, so it was going to happen.

For me I think the big surprise was that the forces within the ANC, in my view, were built up in such a way that it was clear there would be consequence and it was clear that there would be serious consequence with the currency, investor’s confidence in the system, that I thought President Zuma didn’t have the courage and his calculation would be that “Let me stay my hand”. So when he called him back from that Investor Roadshow in London that was quite a significant moment. Why did he do it, why did he do it that way, why did Pravin Gordhan arrive in South Africa and not get called to the presidency and why did the reshuffle itself happen without him at least having received a call saying, “You know, it’s not working out between us, we’ve tried, but thank you very much”.

Something was going wrong there that led to that push and I’m sure in the wash the stories will come out, but the big thing for me is what happens now and I think for clients out there for all of us South Africans, people who are elsewhere, I think we are headed for a period of turbulence, a period of uncertainty because the issues that led to this have not been resolved. There is still a faction of the ANC built around President Zuma that is pushing one agenda and there’s another faction, which is fighting back. President Zuma may have won this round and got us to where we are, but I think there is blowback, there is pushback. You see it around Pravin Gordhan, you see it around Cyril Ramaphosa, Gwede Mantashe and others, and so long as you have those two factions going for it, my view is that you’re going to have the sort of turbulence that we’ve had. So I think this traumatic event with the reshuffle has happened and I think we will have another one before December when the ANC chooses a new leader, it may shock us, and it may lead to some turbulence in the system of the nature of what we’ve seen already. I don’t know what your views are on the economic impact of that.

I think from a political perspective, we’ve seen last year that more and more, the political stage as such is affecting economics, not uniquely to South Africa, across the globe. We’ve had Brexit, which is a monumental political event and that has now transpired into economic impact, you had the surprise election of Donald Trump and of course the events in South Africa. If we take a step back to where you started with the firing of Nhlanhla Nene, that was a massive surprise to the market and that’s why we saw the Rand do what it did in a very short space of time. Not only the Rand, bond markets, equity markets blew up and the country was plunged overnight into a doom and gloom scenario. This time the effect has been a little bit more muted in terms of assets, but I think in line with the picture of turbulence that you paint that is going to come, I think that will play itself out in financial markets.

This time we’ve had noise around the cabinet reshuffle for the better part of almost 15 or so months, that when it happened perhaps it wasn’t as big a surprise as what the firing of Nhlanhla Nene was. Nonetheless, we are where we are, the rating agencies have reacted very, very quickly, so we’ve had Standard & Poor’s, Fitch that have commented, that have downgraded us and we’re waiting for Moody’s. So, this political turbulence, as you paint the picture, Justice, will play itself out into economics and I must say the road ahead looks very bumpy from an economic perspective.

Image courtesy of Currency Partners

I’ve been thinking about this a lot because one of the things I find is that in the moment it looks pretty bad and it looks very turbulent and it’s oh my dear what’s going to happen now, what do I do with my investments and so forth, but one of the things I’ve thought about is, there were some good things that happened in South Africa last year. I thought the collaboration between business, labour, and government was outstanding and I think the reason why we were not downgraded last year was because of that kind of thing. I think we got that stay of execution if you will because we were beginning to tick those boxes and tick them in a way that people were saying, “No, let’s give them a chance, let’s see what these guys are doing”. I think some of the institutions were holding up brilliantly.

The Constitutional Court on the Nkandla matter, you know when you have a court like that saying to you the most powerful man in the country, you were wrong, you shouldn’t have done this, you have to pay back that money and so forth, so I think we did some good things and those things are still in the system. That said, those institutions that work have been under pressure and it will be interesting to see how Malusi Gigaba in the new Finance Ministry handles Treasury, handles the Revenue Service, handles the Reserve bank and its independence and the task that those institutions in particular have built up with South Africans within the international community.

Again, from an economic perspective, the door to the challenges has been blown wide open. The investor perception was, things are under control, the Finance Ministry has a very good handle on the challenges that they face, they’re dealing with it, and the country faces enormous challenges. Towards the end of last year, you saw this narrative enter the South African dialogue sphere, radical economic transformation, white monopoly capital, all of these conflicting political and economic forces at loggerheads with one another and I think that’s one of the questions that the investor community is asking.

South African president’s radical economic transformation. More magic available at www.zapiro.com

On the one hand you have the President very firm about radical economic transformation and on the other hand, even the previous Finance Minister and the new one, Minister Gigaba, is talking about steady as she goes, no change, the economic policy the same as it was, we won’t overspend, we won’t overdo anything. Those two things for me are difficult to marry, those are two opposing, or not necessarily opposing viewpoints, but it’s very difficult to see how you get this no shift in policy and radical economic transformation, which may or may not culminate in land redistribution and I think that’s one of the questions investors are asking.

I think when I look at it, happily, I’m independent, and so I’m going to call it as I see it. Here’s my view. There’s a lot of hot air going around and radical economic transformation, so you look at the genesis of the expression itself. February 9 2017 State of the Nation speech, President Zuma stands up in Parliament and says, “Today we will begin a new phase of radical socioeconomic transformation” He’s said this before and he said this on the 25th of May 2014 when the ANC had just lost four percentage points in the election of 2014 and he said, “We have to get back and do radical socioeconomic transformation”. He did it in 2011 May when the ANC was under pressure from Julius Malema and the Youth League at the time to nationalise the mines.

In a way it’s his radical bone saying, “Oh, you know I’m being pushed to the left, that’s what I’m going to use”. I don’t think that’s any content really to the phrase “radical socioeconomic transformation”. If you look at the ANC policy documents released four weeks ago, there was a big discussion. The ANC had a webinar a bit like what we are having and they had Enoch Godongwana, who is the Head of Economic Transformation in the ANC on Sunday. The question was, “What does this mean, what are you going to do that says this is radical socioeconomic transformation?” and quite frankly, I don’t see what it is.

Therefore, one has to ask, is this a populous play and you started off by talking about populous movements, populous talk, whether it’s the US and Donald Trump, whether it’s other players, and in Europe, it’s the age of the populist in many parts or whether there’s something really here. I think for an answer that’s a little bit clearer, we’re going to have to wait 1) for the policy conference at the end of June and for the ANC national Conference in December. Unfortunately, that means that we are in a holding party because you don’t know what that means. Does it mean a radical change from what we’ve had for the past 22 years or is it just noise and then we’ll stay on as the new Finance Minister says.

It’s not good policy communication if you will and the Finance Minister, I think, finds himself in an interesting place because if his colleagues keep on saying, “Radical socioeconomic transformation” and so forth, while he says, “Oh no, you know the expenditure ceiling will be kept, our fiscal stance is still pretty much the same, who should I listen to? Should I listen to his colleagues like Nomvula Mokonyane and so forth or should I listen to the Finance Minister?” It’s a big problem and it presents him with a challenge to become the Finance Minister. My question to you would be, is he headed to what’s being a Pravin as well.

Look, I think the one thing that markets detest above everything else is uncertainty, and we only have uncertainty now. We don’t have clarity; we don’t know what radical economic transformation means. Some people talk about inclusive growth, which is a fabulous noble aspiration and we need it. It’s beyond time in South Africa. Some people think it means land redistribution without compensation, some people say it’s somewhere in between. Investors need certainty and we don’t have certainty at the moment. Perhaps it’s one of the reasons that the rating agencies have reacted so quickly.

The critics of the rating agencies will say well, they’re being unfair, they’re playing the man and not the game, but because of the uncertainty created with the removal of the ex-Finance Minister, I think they’ve been forced to move. At some stage, in the not too distant future I think we’re going to have to begin to contemplate potentially further downgrades. We’ve seen the knee jerk reaction or we’ve seen the reaction and the market react to the downgrades, fairly muted, but as I said earlier, not really a big surprise, the fact that the Finance Minister was removed, but I think Mr Gigaba is in a very,very difficult place.

When I saw Nomvula Mokonyane, the SAA Chairperson Dudu Myeni, others were laughing off a downgrade. They were saying, “You know, this is just stuff, we will pick up the Rand” and you know, whatever was said and so forth, a big story on the front of the Sunday Times, I thought, “I know you’re talking your political book”, but what does this say when you see those reactions?

Look again from an investor confidence perspective, you don’t invite investors back on your terms. By definition, South Africa needs the rest of the world to support it financially, economically. You know, we borrow a substantial portion of our budget deficit offshore. We need those investors; they’ve been with us for many, many years. We‘ve had a prudent track record since we’ve been upgraded a few decades ago and you don’t invite investors back on your terms, they don’t necessarily just arrive. You need to show them policy clarity. I would argue that we haven’t had policy clarity for the better part of five, maybe even seven years. I think it’s been a mismatch; it’s been very reactionary, rather than prudent fiscal planning as we’ve been through the years.

Policy uncertainty is definitely a problem, investors want to know that they are going to get their money back and I want to touch a little bit later on one of the things that the S&P highlighted, these government guarantees because I think that’s really where the problem lies. Therefore, the notion of inviting investors back on your terms doesn’t work for me. You need to be able to sell something, you need to have a compelling argument of why they should be buying your bonds or buying your equities or lending you money and they need certainty that they’re going to get that money back. The rating agencies unfortunately have said that they’re not sure that South Africa is a place to put your money at the moment.

Moody’s has always been a fascinating house for me in that we’re still two bands above junk. They haven’t jumped to it like the other two. What’s your sense of what’s going on there, or should we get ready for action?

I think since the global financial crisis in 2008, rating agencies have been under pressure. The rating agencies critics are quite right in saying the rating agencies are not infallible, they definitely are fallible. As a consequence, maybe they’re a little bit more cautious when they apply ratings and Moody’s may be even a little bit more cautious than the other two. My sense is that they are waiting to see, they didn’t want to pull the trigger too quickly, but it will be very difficult for Moody’s to come out and say, “No, everything’s fine, we retain our ratings on South Africa when the other two are being so vociferous about the future for South African debt repayments. I suspect Moody’s will follow. The big question is do they pull the ratings on two ratings or two notch downgrades or do they just go one with the negative watch. We’ll only know in the coming months.

Let me paint you a little scenario that I’ve been playing around with and it has some negatives and some positives, but I’d like to hear what your views on it. My view is that all of us, people like me who follow politics and so forth have been concentrating on the ANC and what’s the play inside the ANC, what’s the policy play, what’s the leadership play and how is it going to pan out. So I had my hat on, oh, Jacob Zuma’s winning, oh, the faction around President Zuma is winning or the faction around Cyril Ramaphosa is winning, but I think the ANC, whoever wins is locked in a fireball. Many good people in the ANC know what’s wrong in the ANC, they know what should be done to fix it, but because of the contradictions within the party, it’s unable to fix itself.

So, what we’re watching is not an ANC that is going to say, “Boom, it’s December, we have new leadership, onwards and upwards”. My view is that those contradictions will continue and it will be locked up in this thing. However, I think what I haven’t been looking at enough is the fact that there are some institutions that have been stellar. The Constitutional Court, the Public Protector at the moment have a few questions marks there, but the Reserve Bank and so forth, those institutions are holding up and making the fight, holding up well and I think that many of them will continue.

She’s all yours, boss! For more of Zapiro’s work, visit his website www.zapiro.com

But the civil society is mobile, it is asking deep questions, ordinary people, NGOs, the business community which has been in a slumber in my view, for years and years is saying, “You know, I mean we are corporate citizens, we pay tax and we need to be heard” and I think a country that has an opposition that’s growing, the EFF, the DA, Tshwane, Joburg, they are in play. In a way, I’m beginning to think you know actually I think I shouldn’t worry too much, this is evolving, and maybe the long-term story is a little bit better than the medium term story.

I think you’re right to focus on the political landscape in the future without perhaps a dominant ANC, perhaps a much more spread focus. You’re the political expert, not me, but when I think about these things, there are a couple of concerns that begin to highlight from an economic perspective. For ordinary South Africans, I think the spectre of a Zimbabwe style complete collapse is a massive concern and that was precipitated by the fact the land programme that Zanu introduced. On that note, let me say that from a political policy perspective let’s assume and again you can guide me on this in terms of the political landscape, but Julius Malema, the Chief Commander of the EFF has made it very clear that his problem doesn’t necessarily lie with the ANC, but with Jacob Zuma.

Let’s assume that come December, elective conference, there’s a new leader, that Julius Malema finds it far easier to get along with and in fact negotiate with, and one of the central tenets is land redistribution, nationalisation of the banks, nationalisation of the mines and in my view, the EFF is potentially king makers here, on the back of those demands. Now, I don’t know where you, as we look to the future there’s a marriage of convenience between the DA and the EFF in many of these metros, how does that look in the future.

The DA and the ANC are in policy terms far closer, but I agree with you in that the EFF’s kingmaker role puts Julius Malema in a fantastic position. Certainly, in 2019 in my view that in Gauteng, the ANC will drop to below 50%, that opens up the possibility for a coalition, and a coalition is most likely to look like the EFF and the DA, which are polar opposites. However, Julius Malema says, “I’m ready to be a player, not give my support to so-and-so and blah, blah blah”. So, what will most likely play out is that they get together and Julius Malema says, “I’m giving my vote to the ANC unless you cut me the cake in this way. So that will force the DA to consider deeply, principal and policy and whether those policies can shift a bit, so what you’ll have is not a pure DA outcome, it will be a hybrid.

Economic Freedom Fighters’ leader Julius Malema

If the ANC goes begging at Julius Malema’s door, it will have to do something as well. It might have to up its game on all sorts of things, but it won’t be business as usual, it will be a different play altogether. Now, our politicians are going to have to learn quite a few things about negotiation, about give and take and so forth. Let me ask you, just a few quick questions about what happens now. One thing for me and one thing that South Africans have been talking about is ‘State Culture’. Who is really running this place and so forth? If the general sentiment is, there is a capture of certain institutions, that National Treasury was a target for capture and so now you have a new finance minister, you have a Treasury where Lungisa Fuzile the DG is leaving. How should I read that, has that institution been captured? What happens with the Reserve Bank?

Again, uncertainty, I think it’s far too early to say. What we do know, Justice, is that Malusi Gigaba was a compromise appointment. I think it’s well-publicised that the President’s first choice was Brian Molefe and I think we would have seen a much bigger market reaction had that happened, given the history surrounding Mr Molefe. Again, I think the new Finance Minister finds himself in a difficult position. He’s going to begin to feel the pressure from investors, the need to keep South Africa afloat even within the bounds of ratings downgrades. Arguably, in the early part of this year and towards the latter part of last year, we were beginning to see green shoots, economic growth.

Things were great in the beginning of this year, the rain, commodities.

Things were beginning to pan out. The drought was over, commodity prices were higher, food prices were coming down, and we had a 24-cent decrease in petrol price. You can forget about that, oil prices are spiked, the Rand is spiked, so he’s going to begin to feel the pressure. Whether that pressure is enough for him to stay the course, of course, that will be up to his own personal decision-making and whether he is getting external, let’s call it, “state capture pressure” to open the taps and I guess this is one of the things that I wanted to talk about. The S&P has highlighted quite strongly government guarantees as an issue going forward. They’ve penned in R500bn by 2020 and just for those that don’t know what I’m referring to here; these are the guarantees that are made to the SOEs, to the likes of Eskom, Transnet, PetroSA etcetera, all the government companies as such.

We know that their performance has been less than stellar over the last few years. PetroSA lost close to R16bn, SAA keeps revising their income statement and I have, in my mind, no doubt that those guarantees are going to start to be drawn down on and the reason that I say that, it’s going to be very difficult for an Eskom, or a Transnet, or any of these organisations to go to the market and raise money on prudent terms. I think it’s going to be very expensive, I think the international investors are very unhappy with state-owned entity debt on its own and those government guarantees are going to be drawn down on. When that starts to happen, none of that is factored into the budget deficit going forward. If there is this element of state capture

Basically, we’re being pushed to the loan sharks.

…That’s a good way to put it, we’re being pushed towards the loan sharks, which is expensive and when that happens your budget deficit balloons. What we’ve already seen is debt repayment as a percentage of the budget is already a little bit more than 10% as interest rates rise, that payment becomes more, so we can see that moving towards 15% maybe even 20% over the years to come. I’m really concerned about the budget deficit going forward and that’s where the investor confidence will focus and that’s where the rating agencies will focus and the ability of government to fund and to raise money for the much needed socioeconomic programmes, whether it’s through Sassa grants, whether it’s through the food programmes for schools, whether it’s to fund the hospital’s, whatever it might be to affect the real poorest of the poor, that’s where it’s going to be felt and I think that’s not what’s been factored in, in all of these responses, from the various players in the political spectrum. They’re going, “No, it’s fine, we’ll pick ourselves up, but actually the impact is going to be felt in those areas”.

Malusi Gigaba, South Africa’s finance minister, prepares to speak during a news conference in Pretoria, South Africa, on Saturday, April 1, 2017. Photographer: Waldo Swiegers/Bloomberg

In the 1990s we were here, Nelson Mandela in 1997 picks a new finance minister. That finance minister and the Deputy President later on, Tito Mboweni joins in at the Reserve Bank. One of the things for me and at the time I was a reporter covering politics was the unity of purpose of the message. If Trevor Manuel was in the one room and Thabo Mbeki was in the other room and Tito Mboweni was in the other room, you’d think they’re reading from the same script, they were all essentially talking to it. Other ministers also had an interesting thing. They didn’t go deep into the economy. They didn’t talk about stuff they had no mandate to talk about. So you knew that if I wanted to talk about this economy, there were really only three people, the Finance Minister, the Reserve Bank Governor to some extent, and the Deputy President who became the President and that largely, you saw with all the help from the commodities boom, you saw the growth in the early 2000s. One of the things I find astounding about this administration is that every minister, the Chair of SAA, and others just pronounce on policy all the time. What would you say to Malusi Gigaba today with the red lights that you’ve pointed out; this is what he needs to do to get out of this lack of confidence, this funk that we are in?

I would say that history teaches us that there are examples on both sides of the spectrum, good and bad that will show you how you should run your company’s finances. If we go back in history and we look at nation states perhaps like Hong Kong or Singapore and maybe China, from the eighties onwards and various others, this is what you need to do. You need to create investor confidence. Investor confidence comes from policy certainty, prudent macroeconomic policies, keeping your spending under check and all of that kind of stuff. So those are the examples on the side of good examples and then we can say if we go radical economic transformation route, what are the bad examples and the most recent one being Venezuela, very populous.

The oil price was above $120 a barrel, let’s give everybody everything for free, we make everybody happy when the economic conditions changes very quickly, you erode and you become a failed state. Far be it for me to advise the Finance Minister. I think he has a lot more on his plate than to worry about what I’m going to tell him, but I would just say these are the examples good and bad that we want to follow. I think for the moment, over the last couple of years we’ve been treading down the road that perhaps doesn’t create a good future for my children and your children and that’s my concern at the moment.

SA deputy president Cyril Ramaphosa

Well, we have an interesting play in the ANC that’s going on and it’s a leadership issue. I’ve always believed that with good leadership, a listening leadership, you can turn things around, that you have an opportunity. The ANC now has these factions, which are essentially contesting power. On the one hand, you have many people saying Cyril Ramaphosa must run for office, many others are saying that Dr Nkosazana Dlamini Zuma is absolutely the right person for the job, and it’s up in the air. I found it interesting that more and more people are beginning to say, “Oh, maybe that’s the saviour, maybe our future looks better under this one or under that one and so forth. I’m interested in a third debate that’s going on and it’s about a third candidate in this thing.

It’s Dr Zweli Mkhize, who is the ANC Treasurer General; he spoke up about the cabinet reshuffle. He was very unhappy about it and I see more and more people coalescing around him as a potential leader of the ANC. I’m not sure if that’s the solution, but I think for many people, watching this, listening to us talk now, it is worth thinking about, is this a third way that we haven’t been thinking about enough that what’s happening with that leadership race. It might not be a straight line and that straight line is, oh, you know Cyril Ramaphosa is coming in and he’s going to save us, it’s not a, oh, Dr Nkosazana Dlamini Zuma gave us a fantastic home affairs and I can get my ID in seven days thank you very much. That it’s going to be different and I might have a new leader and leadership style.

Let me ask you this. You referred going back to the days of President Mandela, Mbeki, let’s call them the sort of rosy years in South African economics and politics. I mean there were challenges of course, we don’t want to ignore that, but I would ask the question to you, Justice, was policy set by the ANC and administered by the executive or was policy set by the executive and administered by the ANC. Because right now I’m not sure where, regardless of who the future leader is going to be, what is the policy that we are aspiring towards?

That’s an interesting question. I must say in the 2000s, the ANC set policy and the executive was very clear that we are here for five years and we are going to implement this policy. The biggest fight in the early 2000s in policy terms was between Cosatu and Thabo Mbeki or the GEAR leadership at the time. What Thabo Mbeki did, was to say to Cosatu, “You’re my ally, we love you, we have a hundred year, whatever long history, but I have been sent here by the ANC to implement GEAR and I’m going to do it and you can leave or you can stay”.

Cosatu decided to stay and fight another day. Today, you have too many voices from too many places and that’s a fundamental leadership problem.

That’s why investor confidence has been eroded, because we don’t have policy clarity and that’s a massive issue. This is my own personal opinion; I don’t think the new finance minister has policy clarity. We’ve alluded to it, who does he, which road does he follow? Does he follow radical economic transformation as needed as inclusive growth is, does he follow that road, does he follow prudent macroeconomic policies because quite frankly, we don’t have space to move from an economic perspective. There isn’t money pouring in, we don’t have budget surpluses that can be allocated where they need to be allocated, we are on a tightrope, and I think it’s one of the reasons that the rating agencies have reacted so quickly. Do you have questions?

Yes, there are two questions. Let me take the first one, please comment on the no-confidence vote and its chances of succeeding or influencing any change.

Yes so we have a process that is essentially – there are three ways that if the issue is the removal of President Jacob Zuma from office, there are three democratic ways, the first one would be the ANC itself saying to its leader, “Thank you very much, that’s fine, no further” and that’s a recall like the one we saw in September 2008 when Thabo Mbeki was asked by the ANC to step down. That means that a majority in the ANC National Executive Committee would have to make that call. The next NEC meeting of the ANC is in in two months. At the moment, I believe President Jacob Zuma still has about 55% support of the NEC of the ANC, so I don’t see that happening.

There’s an attempt to impeach President Zuma. That means that there will be a hearing in Parliament in a committee and then it goes to the house and there has to be a two-thirds majority. The ANC has 249 seats out of the 400 seats and it’s unlikely that a two-thirds majority would succeed. The third one is a motion of no confidence. That requires the opposition to get at least 50 seats, 49 seats and for insurances Julius Malema said an extra 20 in case some people don’t pitch, some people go away and so forth.

South African president Jacob Zuma

That is the easiest way without going through the ANC. My view is that the ANC is very clear that you solve problems at home, so David and I are married and we are under fire from everyone, but we say, “We as a couple are going to do this in the house. Don’t let Mrs van der Merwe next door or Mrs Jones next door tell us how to run our marriage, we will sort this thing out”. So even as someone like Jackson Mthembu receives 2000 emails saying, “Do the right thing, where’s your conscience”, he’s saying, “Ah, in the family, what are we saying and I think that is crucial to this vote and I think that many ANC leaders will essentially say, “No, we’re solving it in the home, we’ll go to ANC structures and do this”. So, I don’t give it much chance.

Do you see any of the ousted former ministers standing up, people like Derek Hanekom or maybe even Pravin Gordhan or one or two others saying, “Not this time”?

It was interesting for me, a few years ago there was a contentious motion in the house in Parliament, and there were two ANC MPs who basically said, “The ANC was a three line whip, you are in the house and you vote this way and I can’t remember the other one. The other one was Professor Ben Shiro and he walked out at exactly the time that that was supposed to happen.

So, he abstained?

Former Finance Minister Pravin Gordhan

He abstained instead of voting against it. This will be extraordinary to be a first. The ministers who have been let go, some have resigned, so they won’t appear. Mcebisi Jonas certainly, won’t appear, but Pravin Gordhan is still an MP, Derek Hanekom is still an MP, Ngoako Ramatlhodi is still an MP. Ngoako Ramatlhodi has been very clear that he is going to continue the battle to expose the President, but will he vote? I don’t think so.

He’s going to prefer to abstain?

They would prefer to abstain and say, “No, I’m fighting this in our caucus and inside the structures of the ANC. So I think we are in a holding part.

Okay, which then means from an economic perspective for me, Justice, that (and we often talk about this to our client base), the road ahead is quite long with many twisting turns with apologies to the Hollies of course, and quite bumpy in the future and many of our clients will be asking, what’s our view on the Rand. I think our view on the Rand for the future sadly, I have a strong opinion that the Rand will continue to weaken because I think our budget deficit, amongst others, there are other indicators, but the budget deficit, I think is a big one, is going to continue to deteriorate looking beyond the next six months, a year, 18 months. I suspect there may be more downgrades to come, which will be absolutely catastrophic because it pushes even those peripheral investors out. The cost of borrowing goes up and we’ve spoken about the implications of all that.

As much as these politicians say, “No, we’ll sort it out, we’ll fix it”, we need the rest of the world to love us and right now that love affair, you know we’ve had a love affair for the better part of 20 years through the Mandela years and Mbeki years. That love affair has now I think come to an end and now how does this actual split of that love affair play itself out? I think it potentially could be quite acrimonious. That’s the road where the ANC continues in this uncertainty, from a policy perspective, from a leadership perspective, that means the economical road ahead of us is not great, I have to say.

It is very bumpy and I agree with you, there’s one question, which asks us about all these protests, what is the point and so forth? One thing for me and as we close off, would be to say, you’re absolutely right and I agree with you. I don’t think the ANC is capable now, because of the divisions within it, of resolving these contradictions, the policy contradictions, the leadership battles, the noise that has overtaken our politics. But again, this question that we have in front of us about do these protests help, for me the love affair is certainly in the doldrums, almost not talking to each other, but South Africans standing up, a civil society that can actually go out as we saw.

We are in Sandton, the economic hub of this continent, going out and saying, “Not in our name, Mr President. I think that for me is something that long-term gives me an immense amount of hope that we’ll get through it. Unfortunately the storm is here and we will go through that storm because of these contradictions that you talk about, but I think we have to hold on to that hope that what you see, ordinary people, young people, standing up and saying, “The institutions have to survive, all these things have to continue to work” and I think that’s the pressure that will fix it. The days of, “Oh, Cyril Ramaphosa, oh this leader, that one will come and save us, I think those are gone, but I believe in people and I think many of us have seen, you mentioned Venezuela and so forth, it’s people who bring about change.

Absolutely, and again in the South African context, we always seem to be on the precipice going back decades and decades and it was very encouraging for me seeing people come together, unifying across ideological disagreements, across racial boundaries, across different spectrums, economic spectrums, standing up in one voice. The difficulty, I think is, it’s still disjointed at the moment. There’s no unifying body like you had in the eighties, the UDF for example. There’s nobody cohesively bringing this all together but I guess that will come in time and if we can create that unity in the country, become a powerful force, that certainly is encouraging, but while we get there, I think the road is going to be a little bit rocky.

We’ve come to the end, but someone has snuck in a quick question and it’s for you. They’re asking, “Under the circumstances, the Rand has held up pretty well. What do you think the markets are telling us with the relative strength we are experiencing now?

Yes, as most things, that doesn’t have a simple answer. If we go back to the night that Pravin Gordhan left on his roadshow, the Rand was sitting at about 12.30 to the Dollar and arguably heading stronger. The emerging market world was looking very good, yields were very attractive, and growth was beginning to take place, all of that. Subsequently, we weakened, to R13.90 and one would say,  that was a fairly muted reaction, but it was only muted relative to the events of Nenegate or 9/12 as it’s now called, where we saw the Rand went from R14.00 to R17.00, so relative to that it’s a big move.

A vendor counts out Rand banknotes while working in an African craft market in the Rosebank district of Johannesburg, South Africa. Photographer: Waldo Swiegers/Bloomberg

I don’t think the move is over, but because it was, you know it was in the works, people were expecting a cabinet reshuffle for some time, the immediate reaction was perhaps not as big as might have been expected with ratings downgrades, so on and so forth, but as I’ve said now, we have to look beyond this immediate impact, this immediate ratings downgrade. We have to look beyond what the government is saying about, “No, we’ll stay the course, we have to see potential outcomes going forward, and from that perspective there’s too much uncertainty. I’m really worried about going forward over the next two to five years, budget deficits and the other indicators, unemployment as growth slows again, and the socioeconomic impact of that, my view is that the Rand continues to weaken.

I think for all of us, the next few months, the next few years will be ones where we have to be, the young people have an expression, we have to be ‘woke’. We have to be wide-awake to the signs of where it’s going. It’s one of those things you can’t take your eye off the ball because things happen so fast. The volatility, the turbulence that’s in the system now, I think you are absolutely right, will stay with us for a while, but we always have to look out that there is change here and what that change means, but it is a tough time.

It’s a tough time, but with problems come opportunity.

Lots of opportunity.

Let’s hope we can take hold of it.

Yes.

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