Gordhan spat a red flag over SA

Economists warn of damage

AS THE SPAT between Finance Minister Pravin Gordhan and the Hawks drags on, economists warned yesterday of the negative implications for the economy if the ongoing tensions continued for too long.

This follows Gordhan’s blunt refusal last week to present himself to the Hawks in order to make a warning statement.

Pan-African Investment and Research chief executive Iraj Abedian said yesterday: “Uncertainty is harmful for any economy, and when uncertainty is caused by political plots against the minister of finance, it is doubly harmful.” Harmful Abedian said: “This is the best way to pave the path to a downgrade to junk. One of the key items highlighted by (ratings agency, S&P Global Ratings) was the institutional strength of the country. If the National Treasury is undermined, it is for sure a good ground for a downgrade to junk.”

He said the cost of the tension to South Africa was massive. He cited declining gross domestic product, collapse of investor and business confidence, depreciation of the currency, rising inflation and higher risks of rising interest rates, growing unemployment and deepening poverty.

“Unless the president and the cabinet wake up to the reality, and arrest this destructive slide towards recession, the social welfare is at huge risk… The more the president and the cabinet pretend that this is ‘business as usual’, the more they convince the investors that they have no clue how to govern a modern economy. This is about as close as anyone can come to the sabotage of the national interest. ‘If the Treasury is undermined, it is for sure a good ground for a downgrade to junk.’

“The cost is huge and will be borne by millions of unemployed and the poor over many years,” he said.

Lumkile Mondi, a senior lecturer at the School of Economics and Business Science of the University of the Witwatersrand, said yesterday that there was a growing lack of confidence by business and consumers on the performance of the economy.

“In fact, investment plans are being shelved until after RAND WATCH: The rand weakened against the dollar yesterday, with investor caution over a political row involving Pravin Gordhan hanging over the markets. The rand had traded lower by 5pm, marking its ninth straight daily loss after falling 0.55 percent to R14.4940. It fell in line with most emerging markets after the dollar was boosted by expectations of the Federal Reserve raising US interest rates this year. 2019 due to the lack of a credible centre within the ANC that has a clear vision as embodied in the National Development Plan,” Mondi said.

He said the SA Reserve Bank’s forecasted economic growth of 1.1 percent next year assumed political stability.

Such growth would be on the back of rising prices of commodities such as platinum, manganese and gold “and not by manufacturing or services, which have carried us throughout the tough period we are in”. Downgrade reality “If the country speaks in tongues as it is doing now, a downgrade is a reality,” he said. The country would get a reprieve if the ANC acted and did what was good for South Africa, Mondi said.

Meanwhile, reporting back on Monday’s meeting of the ANC’s national working committee, ANC secretary-general Gwede Mantashe said yesterday that the Gordhan-Hawks saga was hurting the economy and expressed the ANC’s “unreserved” confidence in Gordhan and the Treasury.

He said the pursuit of Gordhan under the glare of the public spotlight had hurt South Africa and the economy.

“I am not saying that Gordhan is above the law, but the Hawks must do their job properly and efficiently. If the Hawks have an issue with a minister, (it) should not be a public exercise.”

He said it was “unnatural” for the Hawks to send Gordhan 27 questions and later ask him to present himself for a warning statement.