Stage is set

By Rafiq Raji, PhD

As has become the tradition days before his budget statements, at least for the last two, South African finance minister Pravin Gordhan has yet again been made to feel uncertain about his future. This time, it might not be a ruse. Brian Molefe, the disgraced former Eskom chief executive, it has been announced, would become a member of parliament; after erstwhile occupant of the seat he takes over, Abram Mudau, “stepped down voluntarily” for health reasons – he probably had little choice in the matter: it is alleged powers that be in the ruling African National Congress (ANC) party instructed him to resign. Others suggest it was only a matter of the date (30 January): asking officials to sign undated resignation letters at the outset of their appointments is common practice. Some party stalwarts from the Hartbeespoort branch in North West Province that Mr Molefe supposedly belongs to, and would represent in parliament, have raised a ruckus. No matter. In the greater scheme of things, the manner of Mr Mudau’s exit is irrelevant: he is out and Mr Molefe is in. And clearly, a great deal of effort was deployed towards the enterprise. Just so the intent is not misconstrued – as if that were not all too palpable already, Mr Molefe’s swearing-in has been scheduled for 22 February: budget day.

Cometh the scandal
So last week, the Competition Commission ruled that a couple of local and foreign banks colluded to rig trading of the rand. Almost immediately, the ANC and South African president Jacob Zuma condemned, in probably the strongest tone ever from either of them, what are largely white-led financial institutions. As if sensing the vehement response was a barely veiled swipe at its chief, the Treasury came out with a similarly aggressive rebuke of the banks’ misdemeanour. Did both sides hear themselves loud and clear? You would think they did. Apparently, one side didn’t think so. Njabulo Nzuza, the ANC Youth League (ANCYL) secretary, was unequivocal in his remarks to TV network eNCA: “our government deployee [Mr Gordhan], since arriving at Treasury, has not made sure there is restructuring…we want a different kind of calibre cadre that would dismantle the approach of protecting banks in South Africa”. The matter should not be trifled with, however. Market manipulation is wrong and especially costly when it involves a country’s currency. So, erring banks should indeed have their day at the Competition Tribunal. Still, it is too late to depoliticize the issue: Zuma loyalists have an axe to grind with the banks.

Man in place
There are worries Mr Molefe, should he get the post, might not be as stringent as the likely outgoing finance minister, Mr Gordhan – albeit one wouldn’t place too strong a bet on his ouster just yet: he has proved to be as hard a man as his principal. Still, Mr Zuma’s newfound zeal for “radical economic transformation” rests a great deal on having a ‘comrade’ at Treasury; especially as Mr Gordhan has thus far proved to be an effective bulwark against the type of populist measures that Mr Zuma’s imminent economic radicalism must necessarily put in place. If one were to be objective though, the type of working relationship that currently exists between both men is ordinarily not desirable: Mr Gordhan can literally do whatever he likes. With myriad corruption scandals plaguing the Zuma administration, however, the situation can hardly be described as ordinary. Fears about a potential plunder of the treasury in the hands of a pliant Zuma minister are not misplaced. And almost all of the potential candidates that Mr Zuma might tip to replace Mr Gordhan would probably struggle to command the type of palpable clout that the incumbent currently enjoys with rating agencies and influential market participants. But these considerations pale in comparison with Mr Zuma’s widely-believed existential goal of seizing total control of government and the ANC before party leadership elections in December. Mr Gordhan is in the way. And time is really now Mr Zuma’s most potent enemy – he has probably just six months to consolidate power. Things may move very quickly indeed. And the budget? A narrower deficit of 3.2 percent of GDP, say, for the 2017/18 fiscal year (starts 1 April) could be targeted – 3.4 percent is estimated for 2016/17 – analysts suggest. To achieve this, it is expected that taxes on income, alcohol and tobacco could be raised. Higher fuel levy and value added tax are also probable, it is believed. But with Mr Gordhan already being nudged out the door, the budget statement may be no more than a nice speech.

Also published in my BusinessDay Nigeria column (Tuesdays). See link viz.

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