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You might be surprised at how carefully some people who’ve never set foot on these shores, people who are mostly blindingly clever at maths and informed to a scarily deep level about our politics and history and whose job includes trading our currency and bonds, have asked me that headline question in the last week.

I have a stock answer that is true to myself but provides cold comfort to those whose fingers must hit one or other button to ‘short‘ SA relative to Russia, or vice versa, or Turkey or Brazil or the Philippines or offer up a financial instrument more exotic than I, for one, can understand, an indecipherable instrument that hedges all the angles but still takes a bet that has within its algorithms a call as to whether South Africa sucks completely or sucks less than the market has priced.

That answer begins: “well it’s complicated …”

Zuma as a president and the various cabals and gangsters that have kept him in place have had free policy and patronage range since 2008.

Nhlanhla Nene’s axing was the worst and most damaging – and exposing – decision Zuma and his cronies have taken since Zuma was elected ANC president in late 2007 (and I would include Mbeki’s recall in that comparison.)

Nene’s summary and unexplained axing and Van Rooyen’s appointment showed astonishing depths of either ignorance, cronyism or hubris – but I am tending towards ignorance, seasoned by the other two.

Only an extremely ignorant man, advised by people whose basic stupidity or grandiosity (undoubtedly a perfect combination of the two ) could have shat on the doorstep of global capital markets, of the people, countries and institutions that lend us money, those who own our banks and those who rate the quality of our government debt – and thought they could walk away from their malodorous mess.

We hear all this blather in ANC discussion documents about the crisis of capitalism, the unstable ‘casino economy’ and the glorious rise of China and Russia (India is occasionally mentioned) and this self-serving internal jabbering has left Zuma surrounded by coterie of people who think sentiment and a rain of Chinese dollars has relieved us of the brutal disciplines of global capital markets? Are these not lessons we learned in 1994 – 1996?

What? China will lend/give us money to bail us out as our currency crashes and the bond yields spike? Dream on morons. The markets aren’t everything you know, I hear him bleat, and this is what I have learned, Zuma proudly asserts, from my week at Focac and the visit of Premier Zi Jinping, my new best friend. The rise of China means ‘western’ markets have lost their power to take away our sovereignty.” Yay! Lets fire that neo-liberal sell-out Nene and get along with the business of taking back what is ours.

… and the awful retribution of the implacable, cold and thoughtless ‘markets’ crushed us under its heel, without even noticing.

Okay so a group of ANC leaders managed to slap him (Zuma) and his handlers down and have appointed Gordhan (again) who is going to deliver up some brutal lessons to this crew (I cannot wait!) … you will see in previous posts why I think that Gordhan’s appointment is not only a good idea, but leaves us in a position even better (politically) than when Zuma fired Nene (although it is a close call) – that is the answer I finally give to those who ask the question in the first paragraph … but only after long and probably boring but stern admonishments that complex systems do not yield up easy, dualistic answers.

But I want you to think about our core political leadership … or rather think about what they think about. Who are they? I assume it’s Zuma and his myriad sons and daughters and cousins and wives, it’s obviously the Guptas, the increasingly awful Lindiwe Zulu and others scattered about the differentially abled ANC Youth League, the Woman’s League and the Premier League with Ace Magashule neck and neck with Zulu in the running dog, protect-the-President-at-all-costs, Joseph Goebbels’ cup.

Jacob Zuma gave a perfect explanation (in terms of his logic) and defence of why he axed Nene in the speech he gave after the announcement. Rian Malan, journalist and author, nailed the problem by closely examining the unscripted words Zuma delivered after announcing that Nene was out and Van Rooyen was in.

You must read Malan’s article (here) but the long and the short of it is Zuma said “I am rebelling against (the idea that) what determines the value of a commodity is the law of supply and demand … The value of a commodity is the labour time taken in production …”

Do you know what that means? Do you realise how dire the consequences that flow from this being the view of our President?

Having been in reading groups in the early 80’s where we poured over and over “Capital: Critique of Political Economy” and several of Karl Marx’s other texts, I know exactly what Zuma thinks he means when he incoherently refers to Marx’s  Labour Theory of Value.

In the intellectual vacuum that Zuma and whatever advisers he used when he fired Nene and appointed Van Rooyen there could only have been a complete absence of the knowledge that most of those who lend us money, buy our financial equities or trade our currency base their decisions on the reliability, predictability and respect of the Minister of Finance. It doesn’t  matter if the traders and fund-managers are wrong or right in using this Cabinet Minister as the touchstone of policy credibility, it only matters that they do and the actions and inactions of the head of the National Treasury are scrutinised and combed with ruthless thoroughness by those who sell or buy our currency or debt (and in this case our bank’s equity as well).

We have a President surrounded by a coterie of what I am tempted to describe as imbeciles – and I don’t mean the Cabinet. Do they really think that  (the interrupted) rise of China will free us from the dictates of markets? Our debt, equity and currency are traded on markets where prices are set by how many buyers or sellers there are, not some sentimental, half baked understanding of Marxist theories from the mid-to-late 1800s. When those markets ‘think’ the politicians are clearing obstacles (Nene) so they (those politicians) and their clients can loot the public purse they (the traders) will unsentimentally sell the financial instruments that are the backbone of our economy and we will crumble. And this time we came that close.

We have a steely new Finance Minister who I believe has more reason than ever to stand up to the ignorant and incoherent policy coming from the centre – although growth and our place in the world will make his job intolerably hard.

We have seen that the centre can be countermanded when its decisions are so bad that they could have a real chance of pushing the country into penury.

However the centre is still the centre, and it is still strong and dominant in the ruling party anyway. We are not home and free while Jacob Zuma occupies the driving seat. It doesn’t really matter if he is a crook or a fool -he has shown unequivocally poor judgement, and this looms over us as an ever present risk.

 

 

I am an independent political analyst focusing on Southern Africa and I specialise in examining political and policy risks for financial markets.

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