Cyril’s failure of leadership is killing the rand
SA’s growth prospects hang in the balance because of his disastrous approach to the land debate
One day I hope to fly around SA giving classes to politicians, even businesspeople, on the very simple theme of cause and effect.
My lessons will be very basic, because our politicians don’t seem to understand that there is a direct relationship between what they do and what actually happens in their jurisdictions. The one is the result of the other.
This very elementary concept is something that is deeply lacking among our public representatives. This ignorance seems to be getting worse, and that’s saying a lot because in the Zuma years things were pretty bad. I would go to ANC conferences and would get stopped by delegates.“Justice,” they would ask, “why did you make the premier of the Northern Cape the loser of the week on your television show?”
Why would anyone ask such a question when the answer is so blindingly obvious? In 2013, this politician used her government credit card to spend more than R50,000 on fast food during her first 10 weeks in office. Why couldn’t anyone see that if she did not want to be called a loser she had to act like a non-loser?
This week it was reported that 96 municipalities across SA “are scrambling to negotiate payment agreements with Eskom for overdue bills that amount to R27.8bn”.
The mind boggles. No one in any of these municipalities stopped and said: we are not paying our Eskom bills, which means that our electricity will be cut off down the line. Now they are “scrambling” to negotiate terms while ordinary people and businesses suffer huge loss and suffering.
Sadly, the failure to appreciate cause and effect is not confined to the local and provincial levels of our political classes. Such ignorance is rampant at national level, as illustrated by events over the past seven days.Over the week the rand retreated to levels last seen in the horrific Zuma days. On Friday it breached the key R15-to-the-dollar level. That’s a far cry from R12 to the dollar, which is the level it was at in January when hope soared that Cyril Ramaphosa would bring about change and policy certainty in SA.
The consequences of such a horrendously weak rand will be horrific for the poor. One analyst pointed out that the currency’s vertiginous depreciation over the past week may mean a 20c increase in the petrol price. That means virtually everything the poor consume – from transport to food – will increase in price. This on the back of massive fuel price hikes in recent months.
The rand’s weakness is not a fluke or just the result of global political shifts such as what’s happened in Turkey. We are also to blame.In a note to its clients, Investec pointed out that “risk-off has turned against SA specifically”. Why has this happened? The bank continued: “The ruling party’s NEC says farms over 12,000 hectares (typically commercial farms) will be expropriated without compensation (from 12,001 hectares up). Investors worry about diminished prospects for SA agricultural production, and so for general economic growth and private sector property rights. Proposed nationalisation of the SARB also tripped up the rand.”
I have said this and will say it again: the greatest current threat to SA’s growth prospects is how Ramaphosa manages the land debate. His poorly conceived land announcement in the late hours of August 1 was an utter disaster. His continued lack of direction on the issue is even worse. His party’s contradictory statements have assured no one.It is not just land. It’s other key policy areas where the ANC, a party commanding 62% of the vote, is being led by the nose by the Economic Freedom Fighters. The ANC’s failure to lead on the nationalisation of the Reserve Bank issue illustrates Ramaphosa’s still very tenuous and fragile control over the ANC national executive committee.
The result of all this is uncertainty. That breeds market jitters. That means that unless these issues are addressed with firmness, the rand will continue to slide.
We cannot continue to blame others for all this. Ramaphosa, a former businessman, knows the rules of the game. Policy uncertainty leads to capital flight and investor disenchantment. The rand is sliding because of his failure of leadership. Can he now begin to do the right thing?