To my mind

Finweek English Edition - - Front Page - COLLEEN NAUDÉ colleenn@fin­week.co.za

NOT OF­TEN HAVE so many peo­ple in South Africa had so much to say about an event. Opin­ions about Trevor Manuel’s an­nounce­ment that he’d re­signed as Fi­nance Min­is­ter were many and var­ied. Some be­lieved it was all a mat­ter of ego: that he’d wanted to demon­strate what kind of re­ac­tion such an an­nounce­ment would trig­ger. Manuel him­self has ex­plained he re­signed be­cause he couldn’t stay on as a min­is­ter once the pres­i­dent who had ap­pointed him had stepped down, and that this prac­tice was fairly com­mon in other coun­tries.

That Manuel de­clared him­self will­ing to serve in the Cab­i­net of the act­ing Pres­i­dent shortly af­ter his res­ig­na­tion is dis­missed as mis­chievous by some com­men­ta­tors. How­ever, more se­ri­ous mar­ket ob­servers and economists did point out it was im­por­tant that if Manuel were to serve in the new Cab­i­net he should be seen as part of the new dis­pen­sa­tion and not as a mere rem­nant of the Mbeki camp.

Re­gard­less of what peo­ple had to say about the Manuel saga, one thing was patently clear: that the rest of the world at­taches enor­mous value to sound fis­cal pol­icy. Even the forced res­ig­na­tion of Mbeki had com­par­a­tively lit­tle ef­fect on the mar­kets. Yet within a few min­utes of Manuel‘s stat­ing he would re­sign the rand plum­meted – the clear­est in­di­ca­tion of sen­ti­ment to­wards events in the coun­try.

The pre­dom­i­nant mes­sage to the leaders of the new ANC fac­tion is that they should ap­proach pol­icy de­ci­sions very care­fully and with due con­sid­er­a­tion of eco­nomic re­al­i­ties.

The re­ac­tion – as ex­em­pli­fied by the weak­en­ing rand – is the clear­est sign the rest of the world views un­cer­tainty about fu­ture fis­cal pol­icy very neg­a­tively. The risk in­volved in such a sce­nario cer­tainly doesn’t en­cour­age the in­flow of for­eign cap­i­tal, without which SA’s cur­rent ac­count deficit, which has climbed to a dis­turb­ing 7,3% of gross do­mes­tic prod­uct, can’t be re­duced.

One can only hope our new leaders – who have al­ready won the favour of left­ist fac­tions, such as trade union Cosatu and the SA Com­mu­nist Party, which have the con­cerns of the work­ing class, the poor and the un­em­ployed masses at heart – will re­main aware of that re­al­ity. It’s one thing to make empty prom­ises of jobs for all, lower in­ter­est rates and higher wages and an en­tirely dif­fer­ent mat­ter to en­sure the fi­nan­cial fig­ures will tally over the long term.

In the same week that ANC de­ci­sion mak­ers are pat­ting them­selves on the back for their suc­cess in get­ting rid of Mbeki as part of an or­ches­trated at­tempt to deal Ja­cob Zuma’s prose­cu­tion a death blow, the fi­nan­cial ser­vices sec­tor in the US was fac­ing a mam­moth cri­sis, ne­ces­si­tat­ing a US$700bn res­cue plan.

It would be short­sighted of the new ANC leaders to refuse to ac­knowl­edge that un­der Mbeki’s lead­er­ship, with peo­ple like Manuel in crit­i­cally im­por­tant posts and thanks to re­spon­si­ble eco­nomic pol­icy, SA was safe­guarded against fi­as­cos such as the sub-prime mess in the US.

Hope­fully, it will give them food for thought dur­ing the for­mu­la­tion of poli­cies and the ap­point­ment of those who have to im­ple­ment them.

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