The future is ominous
VERY late on Thursday night, President Jacob Zuma reshuffled his cabinet, making wholesale changes across the board, but particularly to the finance ministry. He did it, he said, to improve efficiency. On Monday afternoon, one of the key three international ratings agencies responded by dropping South African to junk status as an investment destination – almost two months ahead of its scheduled review.
Standard & Poor’s decision was squarely attributed to the cabinet reshuffle – and fears of further government infrastructure spend, particularly the highly controversial mooted nuclear option. Now Moody’s is considering its own review, with a probable decision by Friday.
Effectively within a week of his restructure, Zuma could have managed to get two of the world’s three most influential financial ratings institutions to give him and his administration a vote of no confidence. We cannot foretell what the scale of the lack of confidence in him will be locally by then, but already it is reaching unprecedented proportions; a united parliamentary opposition, a groundswell of popular dissent, a tripartite alliance shattered and the continent’s oldest liberation movement cleaved in two like never before. This is not Malusi Gigaba’s doing. The man the cynics have dubbed “Midnight Special” was barely in office longer than Des “Weekend Special” Van Rooyen when the axe fell on our sovereign credit rating. This, as we have been told unequivocally by some of the most senior members of the ruling party, was not the ANC’s appointment, but the president’s.
He knew the risks. Van Rooyen’s disastrous appointment in December 2015 sent seismic shocks through our economy. This time though, the damage is far more profound – and will endure far longer.
There are some who rail against the influence and perceived perfidy of international ratings agencies, but if you borrow money as a government or desire foreign investment, those are the conditions you sign up for.
That’s how it works. But the people who will pay the highest price for last week’s exercise of the presidential prerogative are us, trapped in a spiral of inflation and a higher cost of personal debt.
It’s ominous.