BANKER SA – PRESIDENT ZUMA REMOVES FINANCE MINISTER

Publication Date: 04/01/2017

This edition of Banker SA marks the end of a tumultuous year in South Africa. The seminal year was actually triggered on 9 December 2015, when President Zuma removed the then Finance Minister Nhlanhla Nene.

The President replaced Minister Nene, who had the confidence of a broad spectrum of society and the global community, with an unknown backbencher called Des van Rooyen. The immediate market response was a drop in business confidence to its lowest point since 1993, an amount of R500-billion wiped off bonds and equities, and a loss of 12% in the capital value of bonds. The speedy replacement of Minister van Rooyen with Minister Pravin Gordhan stabilised this dire situation to some extent, but the damage had already been done.

These actions, which took our country to low depths, make the theme for this edition very appropriate. “Working together to reach new heights” is exactly what the positive result was of the President’s action on 9 December.

The business sector rallied behind Minister Gordhan and the National Treasury to work together on a number of matters; labour federations were also engaged. More than 70 of the most influential CEOs met at short notice in January 2016, with Minister Gordhan and the National Treasury, to discuss strategies to remedy the damage to our economy and put South Africa onto a sustainable and inclusive growth path. These CEOs established three working groups to work with National Treasury and others in government to start this joint eff ort. A SME work group has put together a SME Equity Fund with an initial capital of R1.5 billion, all from the business sector, and government has also indicated it will contribute. An investment and state-owned enterprise (SOE) work group put investment specialists together with CEOs of corporates in low-growth sectors of the economy, to identify investment opportunities to give impetus to those sectors. The group is also advising on what government needs to do to reposition SOEs to contribute to economic growth. A third group worked to develop initiatives to avoid a sovereign downgrade, and is now looking at critical factors for inclusive growth. A fourth group was convened late this year to address increasing youth employment.

All of these joint initiatives had positive impacts: we avoided sovereign downgrades in June and December; we have established the SME Fund and this will start operating in 2017; investments have begun in critical sectors; and the youth employment work group is beginning to gain traction. Over and above these very concrete results, these initiatives have demonstrated what we can achieve if we work together in the national interest, and that is the critical issue, that our actions are in the national interest.

However, despite these encouraging results, our country still has an immensely long way to go. Our growth rate is still languishing below 1%, and there are numerous politically related factors holding back investment. These include ongoing attacks on the National Treasury and the Finance Minister, regulatory uncertainty, corruption, and problems in the ruling party. We have also been very slow in taking hard political decisions to address serious weaknesses in SOEs.

We must also recognise the strength of our justice system and other critical institutions such as the South African Reserve Bank.

Yet, all of these can be addressed through sustained joint work across a broad spectrum of society. The ongoing civil-society mobilisation through initiatives such as Save SA, the sustained CEO Initiative, ongoing engagement between labour and business, and a municipal election that showed the strength of our developing democracy will all ensure we are successful in putting our country onto a much higher, more sustainable and inclusive growth path. We must also recognise the strength of our justice system and other critical institutions such as the South African Reserve Bank. We must stand together across society to protect these institutions. We need to continue to work together, and keep the national interest on top of the agenda.

Download the Full Banker Magazine SA Edition 20 here.