Suffer the beloved country

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PRESIDENT Jacob Zuma’s ‘open attack’ on Treasury last week, which saw him axing widely respected Finance Minister Pravin Gordhan and his deputy, Mcebisi Jonas, as well as four other ministers, has sent shock waves across South Africa and abroad.

But it is most likely only the beginning of bad things to come.

That is according to local economist Dr Irrshad Kaseeram, Deputy Dean in the Faculty of Commerce Administration and Law at the University of Zululand, who says the ‘midnight reshuffle’ replacing the reputable finance ministers with compliant Zuma allies unknown in the financial world, could be the final blow to SA’s already embattled economy.

‘Home Affairs Minister Malusi Gigaba has replaced Gordhan, joined by Sifiso Buthelezi as his new deputy.

‘Gordhan worked tirelessly to develop an excellent working relationship with the business community, ratings agencies and foreign investors that helped stave off a rating downgrade.

‘Gigaba has still to prove himself to these sectors given the ‘radical economic transformation’ rhetoric, which translates to greater wasteful government spending, bail-out of inefficient state-owned enterprises and nuclear deals that will benefit few greedy individuals at the expense of the economy and its people,’ says Kaseeram.

‘President Zuma’s brazenly reckless actions over the past few days, as well as the axing of well-respected erstwhile Finance Minister Nene in 2015, have sent clear signals to the international investment community that political risk is a serious concern.

‘Moreover, these events signal a deeply divided party and government, and that the Zuma faction do everything possible to assume full control of the State coffers.

‘Energy Minister Tina Joemat was also replaced, which might suggest that that the planned nuclear programme could be fast-tracked before the end of the Zuma’s term, thus burdening future generations of taxpayers and tipping the fiscus to unmanageable debt levels.

‘Given the turn of events a credit downgrade is a certainty.’

Low-growth trap

Kaseeram said a series of policies that the Zuma government has enacted over the past eight years has ‘firmly placed us in a low growth, high unemployment trap’.

‘Business confidence has remained low for six years given the political risks and uncertainties. It is not surprising that private sector investment in the economy has been decreasing over the past five years and is likely to continue on this downward trend.

‘Foreign investors are likely to sell off their rand denominated assets and we will see further deterioration in the currency.

‘This will lead to higher inflation owing to imports being more expensive.

‘South Africa relies heavily on imports of intermediate inputs needed for production, hence we will face higher prices across the board, especially in food prices.

‘This will force workers to demand higher wages.

‘We can expect further rounds of increases in the interest rates, perhaps around 2% to 3% higher than current levels.

‘This means for every R1 000 monthly mortgage bond repayment, one will be paying an extra R300, thereby increasing borrowing costs significantly.

‘Many companies will face bankruptcy and unemployment will rise.

‘The value of wealth will be eroded, real wages will decrease, our pensions are in jeopardy and both rich and poor will suffer.

‘The country is sliding towards the precipice and a divided ANC government is clueless how to stop it.

‘Alarmingly, policies such as the immigration and visa laws, uncertainties around investment treaties, delays in mining legislation and the proposed national minimum wage have resulted in our growth potential diminishing to under 0,5% and the reluctance of the private sector to invest.

‘Sacking Nene, Gordon and Jonas exacerbates our deterioration.

‘It will take many years of pain and suffering before we can regain the glory days of the Mandela and Mbeki governments.’

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