Dodging downgrade bullet is the only task

THE “thin blue line” refers to the police officers who stand between society and lawlessness. In South Africa, Finance Minister Pravin Gordhan is that thin blue line: he is trying to protect us from the devastating consequences a ratings downgrade to junk would bring.

If Gordhan goes, so does our rating — an indication of just how flimsy our economy is right now.

You have to hope that the Moody’s analysts who jetted in on Wednesday to assess South Africa’s creditworthiness ignored that fact as they examined whether the country would be able to deliver on its revenue targets and achieve its modest spending cuts.

As the Hawks increased the pressure on Gordhan to answer the 27 questions about the investigative unit set up on his watch at the South African Revenue Service, markets responded negatively to the vulnerability of an economy so heavily dependent on one individual to make a difference.

Gordhan assured the country that the cabinet was behind his measures to limit spending and raise money for growth in the budget.

But without the wholehearted support of the president, Gordhan, for a time deemed untouchable in the aftermath of the Nhlanhla Nene fiasco and the support proffered by ANC secretary-general Gwede Mantashe, now looks vulnerable.

And if he is perceived to be vulnerable, so is the economy.

But Gordhan has performed a minor economic miracle since his reappointment as finance minister in December last year.

He has quickly built bridges between the government, business and labour to the extent that his recent road-show to the US and UK presented an unprecedented unified front to a cynical investment community. But those investors care nothing for scarves in the bright colours of the South African flag and symbolic gestures: they want evidence of real policy change.

Can Gordhan deliver? Well, in just three months he has achieved a version of what strategist Clem Sunter has been campaigning for — for five years — and what President Jacob Zuma recently derided as a waste of time: an economic Codesa. Or at least an economic Codesa lite.

In December 1991, Codesa, or the Convention for a Democratic South Africa, began to hammer out the details of a peaceful transition to a constitutional democracy.

It was about compromise. It was about putting the interests of the country ahead of political point-scoring. Had the country followed Sunter’s advice five years ago, we might not be in the mess we are in today. Now the government, business and labour have finally woken up to the fact that there should be only one item on the agenda: avoid the downgrade.

But without Zuma’s buy-in, this Codesa will be an uphill struggle.

Gordhan is publicly loyal to the president, to a fault. It would be nice if the president could give his finance minister the same courtesy.

For now, Gordhan is staking his reputation on his ability to get support for a common purpose.

It will make him friends as well as powerful enemies, and his focus on big business and talking to global key players may become the political stick with which to beat him if it goes wrong. If it goes right — and there is no guarantee of that — who will take the credit?

A growing number of commentators suggest that the global economic tide might, for now, be turning in favour of emerging markets.

Uncertainty in the US, which heads for elections in November, is undermining the strong dollar, while the decision by Mario Draghi, president of the European Central Bank, to throw the kitchen sink at that region’s broad economy by cutting interest rates to zero and broadening his bond-buying programme, has revealed the fragility of that financial system.

We could, just could, see a small reversal of the outflows from emerging markets. If we play our cards right, we might just benefit from that. It’s up to us which cards we choose to play.

Whitfield is Sanlam financial journalist of the year