Let’s try a rational executives committee
WHAT a mess we’re in as the year ends. The scale of it is probably best expressed in a tweet on Friday from an excellent economist, Adrian Saville, the chief strategist at Citadel. He produced a two-bar chart showing that South Africa’s per capita GDP was $6 090 (about R92 000) per annum before President Jacob Zuma set off a firestorm by sacking Nhlanhla Nene as finance minister on December 9.
In the time it took to replace Nene with a nonentity, and then, in the space of four days, appoint Pravin Gordhan to replace the nonentity, our per capita GDP had fallen to $5 525.
In other words, the dollar value of what we all produce, the key measure of our wealth and value relative to the rest of the world, had fallen 9.3%.
We will probably never really know who the president sought advice from ahead of this catastrophe, but they clearly gave him very poor counsel. He needs advisers who can predict the economic and business consequences of everything he says and does.
Small Business Development Minister Lindiwe Zulu has got herself in a twist over the Mail & Guardian’s interpretation of an interview she gave in which she allegedly accused business of plotting against Zuma and itself triggering the rout of the rand. She says she never said that and, indeed, it is an insane proposition. Why would anyone with money conspire to impoverish themselves?
And I heartily agree with her when she is quoted in the interview as saying: “The ANC has never understood the role of business. But business is not reaching out. They need to be in constant conversation with the ANC.”
The question, though, is how that constant contact is to be achieved. Business is a collection of different interests. Some will want a weaker rand and some will not. And business and the markets are two very distinct things. It is business’s job to create wealth and the government’s job to distribute it. The markets, largely situated well beyond the reach of either party, sit in judgment of how those two things are done.
The point is that to survive, as Zulu suggests, Zuma has to listen properly. The meetings he does have with what might be called “business” are straitjacketed affairs where no one speaks their mind. Decorum is observed, pictures taken, pleasantries exchanged and the agenda followed.
Instead, I would advise the president to do two things: first, establish a small and informal circle of retired business figures to advise him on what business, amorphous as it is, might be thinking about his policies.
They don’t have to be friends or admirers. They just need to want the country to succeed. People like Reuel Khoza, Saki Macozoma, Laurie Dippenaar, Sizwe Nxasana and Tony Phillips (ex-Barloworld CEO). See them once a quarter. No agenda, no decorum, sleeves rolled up.
Second, find a small group of top economists. There are lots of good ones still in South Africa. Former Industrial Development Corporation chief economist Lumkile Mondi is excellent. Saville, Trudi Makhaya and Dennis Dykes also come to mind. The current head of the Competition Commission, Thembinkosi Bonakele, is outstanding.
Speak to them once a quarter. They all have a conventional view of economic policy, meaning they will think like people in the markets do.
By all means consult others, leftwingers and the like, but for straight-talking informal advice, separating business figures and economists, Mr President, you’ll always know what’s coming, even if you choose to ignore it.
It is impossible, of course, to know how Zuma will respond to his own colossal mistake. His first instinct will be political: to find cover or to engineer events such that they turn attention on his critics or his direct political opponents. That would be a mistake, but it would fit the profile.
One more misstep like this, though, and Zuma will not see out his second term in the Union Buildings. He won’t be recalled, but look out for an early retirement for “health reasons”.
Where Deputy President Cyril Ramaphosa and ANC secretarygeneral Gwede Mantashe are in all this, Lord alone knows. They have been utterly silent.
At one stage you could explain that by them quietly putting pressure on their boss to change his mind about the nonentity. Now it looks like something more. If they’re plotting, they had better make sure their aim is true.