South Africa: Zuma his own worst enemy

President Jacob Zuma’s controversial decision to sack Finance Minister Nhlanhla Nene has further muddied perceptions of the South African leadership and caused more woes for the South African economy. The decision has dented investor confidence and increased uncertainties around the government’s policy direction at a time when South Africa is badly in need of a boost to its fortunes. Instead, the South African Rand has hit record lows, dropping by over 5% to R15.35 against the dollar while the Johannesburg Stock Exchange’s Banking Index has lost 13.5% of its value in reaction to Nene’s dismissal and further travails in the mining sector.

Nene had only spent 19 months in his job, but had largely impressed in the post. After taking over from Pravin Gordhan, he threw himself into the herculean task of reigning in public expenditure and implementing stabilising mechanisms for an economy reeling from the effects of internal and external economic turmoil. Although few expected him to take truly radical decisions against the establishment, he was frequently seen to have taken a principled and independent stance on a number of issues, providing a check against government wastefulness. However, it is this approach that has likely got him in trouble. By standing his ground against the whims of the President and those belonging to a growing patronage network surrounding government, Nene has drawn consternation from a powerful set and ultimately paid the price.

Although there were already rumours of an impending cabinet reshuffle in which Nene could find himself side-lined, it was thought that such a move was too imprudent at a time in which the government is grappling with a number of macro-economic issues.  However, the President has seemingly caught everyone off guard, including members of his own cabinet and ANC party. With even some of Zuma’s closest allies now struggling to follow their leader’s plans and decisions, there is a growing malaise within the South African political administration, and the risk of damaging speculation has increased.

President Zuma has done little to curb wild speculation, showing a total disregard for public and investor perceptions of his leadership. Although he has the constitutional prerogative to hire and fire at will, an explanation for his latest decision to remove Nene would help to quell fears and instil confidence that the decision was motivated by the right factors on such a strategic portfolio. However, since he has not done this, all that remains is speculation that the decision is linked to narrow personal and political interests. Two issues stand out prominently in this regard. Firstly, Nene’s refusal to support an expensive nuclear programme due to funding concerns has drawn consternation from some parties. Secondly, his resistance to the idea of bailing out the troubled national airliner South African Airways has drawn attention to Zuma’s extremely close relationship with the company’s chair Dudu Myeni and raised speculation around how this has played into Zuma’s decision-making.

Zuma met with his cabinet hours before his announcement on Nene with seemingly little – if any – prior consultation on the issue. Even Minister in the Presidency Jeff Radebe commented that “there is no way we would have predicted – we are not sangomas (South African traditional healers)”. Yet with confidence and stability in government increasingly under pressure as a result of Zuma’s self-serving approach, the country’s political trajectory remains on a negative course.  If the President chooses to replace senior figures at whim, what value can the public and investors put on Ministers who can be shifted at any time, even when – or especially when – they are doing a good job. These are the thoughts that will go through many investors’ minds as they consider current and pending interests in the South African economy.

Zuma pulled a similar move with the Minister of Mineral Resources in September, removing a Minister who was in post for only 16 months, and starting to settle into the portfolio. The industry, which had started to warm to Ngoako Ramatlhodi, has now had to start afresh with the relatively unknown Mosebenzi Zwane who surprised all as a selection. Again, the President let the wild fires of speculation do their work instead of taking the nation and investors into confidence with a reasoned explanation.

There are more cabinet changes looming and there remains a genuine risk that these will also serve the strategic interest of the President and his patronage network rather than the interests of the nation. If Zuma remains untroubled by worsening perceptions and fails to recognise how damaging such decisions can be for the country’s economy, South Africa will continue to suffer the consequences of poor leadership and the speculation and unease that comes with it.