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Can African leaders follow the example of Singapore’s Lee Kuan Yew?

By Rafiq Raji, PhD

South Africa’s deputy president Cyril Ramaphosa was spotted earlier this month in the economy class of a commercial flight from Cape Town to Johannesburg. In February, the country’s embattled finance minister Pravin Gordhan had won plaudits for doing the same after delivering what is widely believed to have been a fine budget speech. Mr Gordhan was also seen recently in a public train in Johannesburg without any of the ceremony of his office. At best, they were both making symbolic gestures. It is very well known Mr Ramaphosa travels around ‘very privately.’ His boss would probably not try such a stunt. Word is, the South African president would not need to worry about his aircraft breaking down on him again, like it did in Burundi last month. Plans are afoot to procure a ‘befitting’ airplane for President Jacob Zuma you see. His Nigerian counterpart has actually upped the ante a little bit. Following the example of his American counterpart, President Muhammadu Buhari now flies by helicopter from the State House to the airport when travelling abroad. It is just one helicopter you see, not the many cars in the convoy that needed to accompany him hitherto. Still, the supposedly modest leader has taken on a regal bearing. Not that I mind the pageantry. We cannot soon forget his not-so-confident but good-natured predecessor. I actually like the sound of bagpipes that now welcome the Nigerian president and visiting dignitaries. When I first saw the bagpipers, I wondered how idle they must have been hitherto. Nigerians do not have to worry about their leader flying commercial. This particular one is not going to take any chances. Incidentally, these ‘I feel your pain’ stunts by top South African officials are happening at about the same time as the first year anniversary of the death of Singapore’s revered leader, Lee Kuan Yew. The storied man – who died on 23 March 2015 – tells in his autobiography about flying on Singapore Airlines to a global event, much to the astonishment of other world leaders, especially the ones of third-world countries. Thing is, he did not do it just to prove a point. There is substantial evidence he lived a spartan life. One would certainly not begrudge African leaders if they were a little bit particular about protocol and ceremony. After all, there is a certain African saying about the modesty of deep wells.

I visited Singapore for the first time in December 2014. With the temperature at 29 degrees Celsius around that period of the year, the weather was welcome relief from a very chilly London, the city I travelled from. As I couldn’t immediately hit town upon my arrival due to an academic engagement the following day, I had to make do with sights I saw on my way to the hotel from Changi International Airport. Still, I managed to get a full day to explore the city before leaving. Double-decker sightseeing buses make it possible for you to get a sense of the city if you are time constrained like I was. In any case, most of the interesting sights are in the Marina Bay area of the city. At Nanyang Business School, the venue of the conference I was attending, I struck a conversation with a Singaporean student who was volunteering at the event. I wanted to know how wealthy he felt. Singapore after all has one of the highest GDP per capita in the world. The gentleman thought he was not as wealthy as the average Singaporean. His sentiment caught me by surprise. Surely, if he was attending a top business school like NBS, he couldn’t be poor? So I asked the same question again but now as a series of questions. Do you have cable television? Do your parents rent or own the house they live in? Is any Singaporean able to attend NBS if they are accepted? His answers to these questions were in the affirmative. The “poor” guy was probably thinking about quite a number of his contemporaries driving their Ferraris and Lamborghinis with little care on the major streets of Singapore; a sign of intergenerational wealth. For a highly priced education – attending NBS for instance, the government provides financial assistance he would tell me. But the fundamental test for me of whether a country is wealthy is the proportion of its citizens that own their own homes. 91 percent of Singaporeans own their own homes, according to official statistics. On average, these homes are 4-room flats. That should give you an indication of how “poor” my Singaporean friend really was! Inevitably, I kept comparing Singapore with Malaysia, the country that expelled it from its federation in 1965, just two years after joining. Singapore being a city-state, a fair comparison would be with Kuala Lumpur, the capital city of Malaysia. One of my regrets when I visited Kuala Lumpur in 2011 was not being able to visit Singapore just an hour away. Africans face many constraints when they travel abroad. To try securing a visa then to see the neighbouring city would have been a little tasking. It would take another three years before I would finally get the chance. Today, Singapore is five times richer than Malaysia, on a GDP per capita basis.

Many an African leader uses Lee Kuan Yew’s example to justify holding on to power. Mr Lee was prime minister of Singapore for three decades. The typical argument goes thus: the leader needs time for his or her policies to yield results. Look at Singapore they say. The parallels to be drawn with Singapore for many an African nation that gained independence in the 1960s are not flattering. And just because a model worked for Singapore does not mean it would lend itself well to the African condition. In fact, one could say many a longstanding African leader had similar opportunities as Mr Lee. Africa’s current mixed fortunes point to the different directions taken by those opportune to lead its affairs at the time. My view is that it is too late for a Singapore model to be adapted for Africa’s peculiarities. A major constraint is the continent’s heterogeneity. More than 70 percent of Singaporeans are Chinese. Times have also changed. Growing up in Nigeria in the 1980s, everyone watched the same government-owned television channels, land telephone lines were the preserve of civil servants and the wealthy, most aspired to enrolling at government secondary schools, and there were no private universities. Today, things are very different. Social media has democratized speech. Most Africans have mobile phones. And parents are spoilt for choice on schools for their wards. So, some of the stringent government controls implemented by LKY’s Singapore in the 1960s to 1980s – that in part contributed to the country’s success – are no longer suitable. That said, there is clearly a need to rethink Africa’s “democratic” structures. Our current systems are just too expensive to maintain. Quite frankly, African countries – Nigeria for instance – have no need for bicameral legislatures. And the costs of entry for aspiring politicians – well intentioned or otherwise – are all the more prohibitive on both pecuniary and moral fronts. Additionally, the emoluments and privileges accorded elected officials in a lot of African countries make the trappings of power all too attractive for rent-seeking leadership. Mr Lee made sure to dispense with such distractions. Is such a man or woman to be found in African countries currently in need of that type of leadership? Yes. Do conditions in these countries facilitate the emergence of such rare men and women into elective positions and allow them effectively govern without relying on patronage to buy influence? Not really. Homogeneity and a power-distant culture provided the foundation for the type of political stability that Lee Kuan Yew’s visionary leadership needed to triumph in Singapore. Most African cultures are power-distant as well. But the heterogeneity of cultures, beliefs, religions, and many injustices have made it difficult for such type of leaders to emerge on the continent. And the few that manage to get ahead soon learn weary indeed is the head that wears the crown.

Also published in my back-page column on BusinessDay Nigeria newspaper. See link viz.

Is Nigeria’s central bank still targeting inflation?

By Rafiq Raji, PhD

The monetary policy committee of the Central Bank of Nigeria meets this week, 21-22 March. A few weeks earlier, the CBN published a research paper questioning the relevance of inflation targeting in the Nigerian case. Some have interpreted this to mean the CBN may have decided to focus on growth as opposed to targeting just inflation hitherto. Not that the Bank did not already signal this when it cut the monetary policy rate by 2 percentage points to 11 percent in November 2015, a time when it was quite clear the inflation outlook was beginning to deteriorate. At the time, it had already been close to five months since headline inflation breached the 9 percent upper bound target of the CBN. Annual consumer inflation was 9.2 percent in June 2015. Nigeria’s National Economic Council chaired by the country’s vice-president would also be holding a retreat this week. The widely dubbed ‘emergency economic summit’ is scheduled for 21-22 March as well, coinciding with the CBN’s MPC meeting. Both meetings would be happening against the backdrop of recently released poor growth data and a change in the country’s ‘B+’ credit rating outlook to negative by Standard and Poor’s last week. The ratings agency cited Nigeria’s monetary policy as a major motivation for the negative outlook. This possibility was highlighted in this column on 24 February 2016, a lengthy piece that also decried the rather discouraging state of Nigeria’s 2016 budget, which is yet to be passed into law. Then, I said: “with monetary and fiscal policies in such shoddy form amid a continuing oil price slump and strained finances, S&P would likely put Nigeria on a negative outlook or even a downgrade in March.” Having now put Nigeria on negative outlook, S&P would likely downgrade the country’s rating in September, when the next assessment is scheduled.

It is not clear how much of this week’s deliberations at the authorities’ economic retreat would affect those of the monetary policy committee. But it is now quite palpable that the CBN needs to do something about rising inflation. Some argue the recent surge in the headline figure to double-digits (11.4 percent in February) is belated, as anecdotal evidence suggested much higher price increases had been observed hitherto. With inflation expectations now quite heightened, the CBN’s denialism is no longer tenable. That said, the temperament of this central bank would likely remain dovish. Year-on-year growth of 2.1 percent in the fourth quarter of 2015 was abysmal. Growth was 3 percent on average in the prior three quarters. Unfortunately, the growth outlook for 2016 is quite dim. Thus, the CBN is likely determined not to contribute to further deterioration in growth. It is probably reasonable to say the MPC may decide to keep the policy rate unchanged at 11 percent this week. Still, there would likely be at least one independent member of the committee who will point out that this is not the appropriate approach. The one staff member who would have reiterated the need for foreign exchange flexibility is currently under administrative suspension. Although this action is unrelated to his minority view among staff members of the MPC, it nonetheless means Governor Godwin Emefiele need not worry about any member of his team deviating from the official – albeit erroneous – view that current policy measures are appropriate. Frankly, analysts are probably guessing when they make their calls on this week’s MPC meeting. We have all probably been trying to be mind readers, considering it has been quite a while since the CBN made data-dependent decisions. In the rather absurd Nigerian case, the analyst faces a dilemma. Do you take a data-dependent view or try to read the ‘minds’ of MPC members?

I have decided to take a data-dependent view onward. Inflation is rising and would probably continue to rise. My forecast for annual inflation in March is 11.6 percent, a 1.1 percent month-on-month increase. The naira is overvalued and should be devalued. I have revised my naira forecasts accordingly. My end-2016 forecast for the exchange rate is 250, a 26 percent devaluation. Policy tightening is warranted. However, there is more than one mechanism through which that can be achieved. This CBN has shown a preference for unorthodox tools, especially the cash reserve ratio. So, the CBN could potentially tighten policy via the CRR. My expectation is that the Bank would be forced to reverse its current expansionary stance in the third quarter of 2016. The monetary policy rate could be 13 percent – 2 percentage points higher than the current level – by end-2016, in my view. Still, in the unlikely scenario that the MPC decides to increase the policy rate at its meeting this week, markets would certainly see this as a positive surprise. What markets really want, however, is for the naira to be devalued. Those who say that this is inevitable have a strong argument. S&P argues as much, expecting the naira would be devalued further in the not too distant future. My own forecasts assume potential naira devaluation could be as early as March, to 210 say, from 199 currently. Nigerian authorities continue to hope for a recovery in oil prices, however. Such a fatalistic and sub-optimal approach to macroeconomic policy has never bolstered confidence anywhere in the world or at any time in history. They are probably encouraged by the recent increase in the price of crude oil to the $40 area. As fundamentals do not support a sustained recovery, this is foolhardy. For clarity, a data-dependent policy move would be for the CBN to devalue the naira and hike its policy rate to tame inflation. I am however skeptical the Nigerian central bank would be so bold. But should it do so, that would be really just proper. Just proper.

Also published in my back-page column on BusinessDay Nigeria newspaper. See link viz.

South Africa’s central bank may hold rates

By Rafiq Raji, PhD

The monetary policy committee of the South African Reserve Bank meets this week, 15-17 March. The consensus view is that the Bank’s benchmark rate would be left unchanged at 6.75 percent. Monetary policymakers at the US Fed, Bank of England, and Bank of Japan also meet this week; all likely to hold rates as well. Incidentally, Moody’s analysts would also be visiting South Africa during the week. Their planned visit comes after putting the country on notice for a potential downgrade of its rating to one notch above junk, the same level rival ratings agencies – Fitch and Standard and Poor’s – currently put South Africa. They say this is not certain, as the rating could also be kept as is, if authorities convince them that the country’s growth outlook would not deteriorate further. I wonder about that, seeing as growth is least likely within the powers of authorities to influence at this time. I think they would downgrade the country’s credit rating by at least a notch. My view – earlier highlighted in a prior column – is that they are probably trying to determine whether a two-notch downgrade to junk status would not be more appropriate. SARB MPC members have probably taken account of a potential junk status scenario in their assessments. Finance minister Pravin Gordhan seems resigned to the possibility as well, based on his comments to the media on 3 March 2016 viz. “It doesn’t matter if it’s too little too late, let’s give it our best shot. If it was too late, at least the people will say we tried.” He continues to make a fervent case for a more lenient ratings assessment, however. In any case, market participants have already priced South African assets for junk status. So, it is no matter really.

More importantly, MPC members would be meeting against the backdrop of still heightened price pressures and a dim growth outlook. The monthly Reuters South Africa Econometer survey – which I participate in – conducted in March shows growth expectations have dampened somewhat. The median growth estimate for 2016 by economists surveyed by Reuters in March is now 0.7 percent. Only a month ago, the figure was 0.9 percent. I am sticking with my 0.9 percent 2016 growth forecast – which I made prior to the downward revision to the same figure by the SARB in January – until there are much more robust indications of the direction the economy is taking. Current trends suggest a downward revision is more likely. Manufacturing production – 13 percent of GDP – contracted 2.5 percent year-on-year in January, a poor start to the year. The only upside is probably news that there might not be power cuts – a major constraint on manufacturing in 2015 – for the remainder of 2016. Still, it is probably fair to say 2016 growth would likely be between 0.5 and 0.9 percent.

Inflation expectations continue to deteriorate. Headline inflation breached the upper bound inflation target of the Bank in January, rising 6.2 percent year-on-year from 5.2 percent in December 2015. The monthly pace is noteworthy. Consumer prices accelerated 0.8 percent month-on-month in January, after only a 0.3 percent acceleration in the prior month. There are indications a quickened pace is likely in February. Year-on-year producer inflation rose significantly in January to 7.6 percent from 4.8 percent in the prior month, a 1.6 percent month-on-month rise. When the difference in prices of final manufactured goods – headline producer inflation – is discounted for volatile food and fuel prices, there is no significant change. Thus, it portends a much faster pace for consumer price inflation in February. The major drivers remain the exchange rate and food prices. An ongoing drought is weighing on agricultural output, forcing food imports to meet supply shortfalls. A weakening exchange rate makes these imports expensive, causing inflation. My annual consumer price inflation estimate for February is 6.7 percent, a 1.1 percent month-on-month acceleration. A likely reduced monthly pace in March – 0.8 percent say – should still see headline inflation come out at 6.1 percent in Q1-2016. So, the SARB’s expectation of 6.2 percent annual inflation in the first quarter of 2016 – if it is unchanged after the March MPC meeting – may still be vindicated. In any case, I do not expect significant changes to their forecasts at this meeting.

Having front-loaded a 50 basis point rate hike to 6.75 percent in January, I would be quite surprised if they decide on another hike in March. This is even as the current account deficit deteriorated significantly in the fourth quarter of 2015 to 5.1 percent of GDP from 4.3 percent previously, due to lower exports and net outflows. Even this may not have been too surprising for MPC members. Their 2016 forecast for the current account balance already reflects at least a 1-percentage point of GDP increase in the deficit. The only downside is that the South African Rand would likely remain pressured for longer. Incidentally, market reaction was relatively muted after the current account data release, especially if you consider the volatility of the exchange rate after President Zuma’s sudden sack of respected finance minister Mr Nhlanhla Nene in December 2015 and subsequent untoward political developments. My view is thus MPC members would wait a bit to see the effects of policy measures announced in January. The voting pattern of MPC members in January also suggests rates would be held in March. The two committee members who voted for a 25 basis point rate hike in January are unlikely to want another one after the 50 basis point increase in January. The one member who wanted rates unchanged in January is likely to still hold the same view in March. I imagine at least one of the three members that voted for a 50 basis point rate hike in January would probably vote to hold rates or hike by 25 basis points. Thus, a majority of committee members is likely to vote to keep rates unchanged at 6.75 percent at this March MPC meeting. This is also the consensus view among analysts surveyed by Reuters ahead of the meeting.

Also published in my back-page column at BusinessDay Nigeria newspaper. See link viz.

#Zuhari and the Nigeria-South Africa relationship

By Rafiq Raji, PhD

President Jacob Zuma is visiting Nigeria this week. The trip would probably be welcome relief for the South African leader. Not that his troubles back home would not follow his trail. The visit is probably just as well for his Nigerian counterpart, who has been itinerant of late. See, they are coming; one could almost hear him say chidingly. There are also indications a long overdue economic summit is planned for this week by Nigerian authorities. President Buhari is facing increasing criticisms for his not so deft handling of the economy thus far. Apart from this commonality with the South African leader, the pair – ‘Zuhari’ – could not be any more different. Still, they would probably get along. Both men are old-fashioned. They probably also have mutual respect for one another. Corporate SA dearly hopes so, MTN above all. The South African telecommunications company is trying to reduce a fine imposed on it by Nigerian authorities for refusing to disconnect unregistered customers on its network. Based on its agreement with the Nigerian government, MTN is liable. However, it probably did not count on an administration so bold. The company’s attitude has not been helpful either. Most of the steps the South African company has taken hitherto suggest a belief it could get away with its infraction. Were Mr. Buhari not president, it probably could. Unfortunately, these are hard times for the Nigerian government. I have been asked – and have read commentary – about whether the MTN issue would not discourage potential investors. It never occurred to me that investors would be discouraged from investing in a country because its authorities might just enforce signed agreements. Oh, wait a minute. Most investors do not think those agreements matter. Well, I guess they know better now. By its actions, MTN trifled with Nigeria’s national security. And the company’s attitude since the fine by the Nigerian telecommunications regulator seems unremorseful to me. To think now MTN recognizes it should list on the Nigerian Stock Exchange. If it had done so much earlier, Nigerian authorities – and indeed Nigerians – would probably have been much more sympathetic.

As it would set a bad precedent, I would be surprised if President Buhari interferes in the MTN matter. Otherwise, the same arguments could be raised for similar flexibility on behalf of oil companies and former Nigerian officials being investigated for corruptly enriching themselves. President Zuma would be wise not to let the MTN issue dominate his discussions with the Nigerian president. They should instead focus on the broader Nigeria-South Africa relationship. ‘Zuhari’ should seek ways to ease the recurrent but unnecessary tensions and rivalry between the two African heavyweights. Sometimes onerous visa conditions for Nigerians travelling to South Africa and xenophobic attacks on Nigerian residents are examples. There have been worries that perhaps Nigerian authorities are targeting South African companies. I do not think so. The MTN issue is an unusual case. Some investors have also been wondering why a number of South African companies have decided to divest from their Nigerian operations. My view is that these companies did not seek or get the best advice before embarking on their Nigerian ventures. Also, I think these South African companies underestimated the taste and intelligence of the average Nigerian consumer. Woolworth and Truworth did not succeed in Nigeria because Nigerians simply did not like their clothes, in my view. The price tags for their clothes were not commensurate with their quality. Brand recognition was probably also a factor. The average Nigerian – even those with pennies – likes to show off. Even the bus conductor would not be caught dead wearing clothing labels that would not be appreciated by his peers. Nigerians buy clothes not just for the quality. They want respect. The South African clothing retailers would probably have succeeded if their goods were cheaper. The Nigerian consumer probably thought a much valuable brand could be had at the same prices on offer at either of Woolworth or Truworth. At least, I thought so. For instance, British clothier, TM Lewin has been doing quite well; albeit some Nigerians still prefer to go to their London stores just so they could say how much in British pounds they spent shopping.

Not all South African companies in Nigeria have had bad experiences, however. Food retailer, Shoprite, is doing well, albeit 2015 could have been a better year. And the company has made public its intention to brave the current challenging business environment. Like other businesses in the country, it has been hit hard by scarcity of foreign exchange. However, it is probably succeeding because it has adapted faster. It sells more Nigerian food brands, meaning it buys locally; and its prices are competitive. The South African food retailer began to gain increased custom when Nigerians began to realize its published prices were sometimes lower than what obtained in the open market. So Nigerians thought why go brave the scorching heat in sometimes stuffy markets when you could go to an air-conditioned store and still save money. What Shoprite did was to put a premium on the not so common goods to make up for the meager margins on the fast-moving items. In the case of South African milk producer, Clover, it probably did not know not many Nigerians drink fresh milk; not even those that can afford it. Apart from quick spoilage due to power cuts, most Nigerians have grown accustomed to certain evaporated or powdered milk brands. It probably befuddles foreigners (and some Nigerians) that northern Nigerians – even the humble ones – for instance would only take evaporated liquid (not powdered) milk with their tea. So a Clover needed to target that section of the country to succeed. But then it would still have faced stiff competition from more established milk brands with history and products that actually taste better. Proper research would probably have revealed the size of the Nigerian fresh milk market might not even be big enough to warrant their move in the first place. So, it is probably just as well that the foreign currency crisis has provided Clover with a good excuse to exit the country. In a nutshell, South African companies need to adapt to the tastes of the Nigerian consumer to succeed. If what you are selling are fast-moving consumer goods, price is everything. If your pitch is quality, you have your work cut out for you because Nigerians set a very high bar for that. Not knowing this is probably what caused the failure of the South African consumer goods companies that have left. Nonetheless, there has been some positive collaboration between businesses from both countries. Despite its recent troubles, MTN has done exceedingly well in Nigeria; when it took care to adapt to the environment, that is. Standard Bank has also had a good experience in Nigeria, never mind the recent accounting issue. The South African bank has probably succeeded because of its choice of Nigerian partners, who are well grounded and connected. Other South African companies should probably take lessons from them.

Also published in my back-page column at BusinessDay Nigeria newspaper. See link viz.

Gordhan’s burden

By Rafiq Raji, PhD

Published by BusinessDay Nigeria Newspaper on 01 Mar 2016. See link viz. 

Second comings in politics are treacherous. I fear a great deal for South Africa’s finance minister Pravin Gordhan. Not that I think him a saint or anything. The fragility of his newfound power is becoming writ large all too early. Mr Gordhan delivered a fine budget speech on 24 February. Even the usually disruptive members of the ultra-leftist Economic Freedom Fighters were surreally attentive during the speech. In contrast, the EFF has used every opportunity to embarrass the country’s president whenever he appears in parliament. They even walked out on him at his most recent state of the nation address. After the budget speech, the EFF issued a surprisingly supportive statement; albeit they were quick to point out a higher target for cutting wasteful expenditure could have been set. For instance, the finance minister proposed about 25 billion rand in wasteful expenditure would be cut over the next three years. This is about the same amount the country’s auditor highlighted as wasteful spending each year. The warm reception received by Mr Gordhan has definitely not gone unnoticed by the South African leader. Still, most of the commentaries I have read since suggest the finance minister could have done much more. There is a consensus he has limited political space to enforce needed reforms. But by not announcing much stronger fiscal consolidation measures now, he may have missed his best chance of doing so. Mr Gordhan has about a three-month window to succeed. Should South Africa’s credit rating be downgraded by Fitch or Standard and Poor’s in June – as is increasingly likely, President Jacob Zuma may not need his credibility anymore. Mr Gordhan needed to have announced measures so far-reaching it would have left ratings agencies with little choice but to reconsider a potential downgrade. Such symbolic and quick-win measures like the rationalization of ministries and reduction in the size of government would have been tremendously reassuring to ratings agencies. What Mr Gordhan’s budget has done is set a ceiling – adjudged to be still low – for potential reforms. The problem is that much of what is good about the budget are slated for much later, when perhaps Mr Gordhan would have since been dispensed with. The finance minister aims to reduce the fiscal deficit to 2.4 percent of GDP in the next three years from an estimated 3.9 percent in the 2015/16 fiscal year. Market participants are skeptical Mr Gordhan would be able to fulfill his promise.

Markets were also rattled by revelations on 26 February that attempts were made to disorient the finance minister days before his budget speech. He reportedly threatened to resign afterwards, a move that would have been tremendously damaging to investor confidence. Confirming the incident, Mr Gordhan said he received a letter from the country’s elite police investigative unit asking him to elucidate on the activities of an alleged rogue unit at the South African Revenue Service, which is believed to have spied on top politicians during his previous tenure as finance minister from 2009 to 2014. Mr Gordhan has always maintained the tax agency acted within the law. There have been other incidents that suggest the finance minister may not have the full support of his principal. Well, officially, he does. But then President Zuma announced ‘below-inflation’ salary increases for political office holders a couple of hours before his finance minister was slated to present an austere budget. Days before, President Zuma took a not so veiled swipe at the academic qualifications of his highly regarded finance minister. Mr Gordhan has a degree in pharmacy. Desmond van Rooyen – the much criticized replacement for the respected former finance minister Mr Nhlanhla Nene who was sacked in December – has a master’s degree in finance but is awfully inexperienced. President Zuma is adamant Mr van Rooyen is the most qualified finance minister he has ever appointed. Mr Gordhan must be mighty glad he can count on support such as this. Nonetheless, there is clearly a determination on Mr Gordhan’s part to see the back of the South African Revenue Service commissioner, Mr Tom Moyane. He has reportedly asked that Mr Moyane be removed. President Zuma is believed to have demurred. A seemingly frustrated Mr Gordhan remonstrated publicly about the breakdown in his relationship with the tax agency chief who is functionally his subordinate. Mr Moyane was appointed by President Zuma and has his full support. Thus, were Mr Moyane to be let go at Mr Gordhan’s urging, the symbolism alone would probably be more politically damaging to President Zuma than the December debacle. Mr Gordhan should probably have insisted on Mr Moyane’s removal before accepting to return as finance minister. Now, he does not have much leverage.

Bear in mind, all these happenings have occurred amid recent race-related and sometimes violent protests at the country’s universities that could spread nationwide. In comments to the media, Mr Gordhan believes a clearer outlook on his future would be palpable by October. If either or both of Fitch and S&P downgrade South Africa to junk status in June, he may not have that luxury. I think June is much more apt. Mr Gordhan has inevitably tied his longevity on the job to the country’s credit rating. If South Africa manages to escape a downgrade in June – a remote possibility, he may have the power to do so much more than he announced in the budget. A downgrade suits the political calculations of the finance minister’s opponents. And he knows. These revelations of infighting at the country’s finance ministry have certainly undermined confidence. What could only be inferred is now palpable. It is now very clear Mr Gordhan does not have the political backing he needs to fulfill the promises he made in the budget. This truth is not lost on markets. And he cannot resign just yet. He has to wait till June at least. Mr Gordhan’s challenge is eerily familiar. He is going to get bruised. Sadly, the ultimate casualties would be poor South Africans.

Also published on my company’s website on 02 Mar 2016. See link viz.