Newly-appointed Finance Mininster Malusi Gigaba’s statement points to a disregard for what a downgrade will do to the cost of capital and ability to spend on crucial infrastructure and social services, and highlights the spurning of the global financial system prevalent in some ANC quarters, writes Daniel Silke.
Barely 24 hours into his new job as Minister of Finance, Malusi Gigaba clarified two important aspects of his new appointment which represent major shifts from his predecessor. Both aspects of the new Gigaba era should leave South Africans concerned and calling for greater scrutiny than ever before on government.
Firstly, Gigaba unambiguously placed the highly contentious nuclear power build project firmly back on the agenda. Pravin Gordhan had certainly been reluctant to commit to this level of capital spend and had largely kicked for touch on the issue in the budget in February – a sure sign it was something he just did not want to deal with.
Now, it’s firmly back on the agenda. And South Africans will need to be more vigilant than ever before on the motives for its revival and the mechanics of the procurement deals and their linkages into the broader business community and vested interests.
While Gigaba attempted to reassure the country that the programme would not be “reckless” and “will be implemented at a pace and scale that the country can afford”, these commitments will be dissected and analysed in the months and years to come.
With rumours swirling for years about the role of Russia and Gupta-related companies, such a rapid move on the nuclear issue is only likely to add to suspicions from an increasingly critical and sceptical electorate. South Africans are more alert now than ever before not only to possible nefarious activities but also around the question of whether our ailing economy and inability to raise the huge capital required can tilt our economy to breaking point.
But putting the nuclear issue aside, the second aspect of the first 24 hours of Gigaba’s reign is perhaps more worrying. At his first media briefing, Gigaba expressed a more populist view of not only economic policy but also his world view. It is precisely this world view of disdain for global financial institutions, big business and economic orthodoxy that has increasingly found support within several subsections of the ANC including the African National Congress Women's League, the African National Congress Youth League, the MK Military Veterans’ Association, and the Black Management Forum among others.
Gigaba’s statement on this was clear: “I will not be distracted by issues that are not relevant to the task at hand — accelerating radical economic transformation … for too long, there has been a narrative or perception around Treasury, that it belongs primarily and exclusively to ‘orthodox’ economists, big business, powerful interests and international investors.”
So, taking the rhetoric literally, South Africa just did precisely what it does not need – create further policy uncertainty and negative sentiment. Although Gigaba did concede that “South Africa was open to [ratings agencies] and accessible to them”, this was less than convincing.
Gigaba’s statement points to an almost indifference of the ratings agencies and a disregard for what a downgrade will do to the cost of capital and inability to spend on crucial infrastructure and crucial social services.
On your first day in office after the most controversial Cabinet reshuffle in South Africa’s recent history, reassuring foreign investors might have been the best option but this was not the case. Clearly, the view of a category of international investors will now be secondary. And this seems to include the ratings agencies, which have been accused of holding the country to ransom.
Gigaba also plays directly into the narrative that the currency is therefore also expendable as the “orthodoxy” of the markets are not to be trusted. After all, why should we be held to ransom by faceless currency traders with their own political agendas as we proceed with "radical economic transformation"?
Of course, Gigaba’s finger-pointing at big business and powerful interests can reflect just as much the much-maligned global multinational club or, for many in South Africa, crony capitalists and their vested interests. Somehow, we know which side of the equation Gigaba was talking about!
For many within the ANC, this spurning of the global financial system is nothing new. And it is to be found in cross-cutting factions well beyond the Zuma/Gordhan divide that we have grown used to. But such a clear articulation of this narrative - by the incoming minister of finance no less – represents a dramatic shift and a clear window into the thinking of those seeking to increase their grip on power.
On Friday, in a particularly embarrassing tweet for any South African to read, the highly influential Ian Bremmer, president and founder of the Eurasia Group – a political risk and consulting firm based in New York said: “Zuma is as politically shrewd as they come. And as economically illiterate. Things are not looking good for South Africa”.
Bremmer is precisely representative of the global “orthodoxies” that Gigaba laments – but they are hugely influential (and beneficial) as time will tell. But for Gigaba and President Jacob Jacob Zuma, the institutions of the West are to be spurned. There are new friends out there in Moscow and Beijing. They don’t make demands about accountability and transparency. They are only too happy to extend their footprint into this country. They applaud the politics of the “big man”. They are seen as the role model for the future.
As December’s elective conference approaches, the factional divide in the ANC won’t just be about personality clashes and who gets what position. It is increasingly also about two different visions of South Africa’s place in the global financial community. We are a society now deeply polarised across a host of interlinked and intertwined political economy issues.
* Daniel Silke is director of the Political Futures Consultancy and is a noted keynote speaker and commentator. Views expressed are his own. Follow him on Twitter at @DanielSilke or visit his website.Read Fin24's top stories trending on Twitter: Fin24’s top stories