Dec 11, 2015
With eager feeding food doth choke the feeder;
Light vanity, insatiate cormorant,
Consuming means, soon preys upon itself
- Shakespeare, Richard II
The Helen Suzman Foundation does not support any particular political party. Its mandate is to promote the rule of law in a liberal constitutional democracy. Our constitutional democracy requires accountability of holders of government office: the provision of good reasons for decisions. The President of the Republic has a particularly salient and stringent responsibility to adhere to the highest standards of accountability, setting the tone for Ministers and public servants.
The need for accountability is never more urgent than when decisions have immediate, strong and adverse consequences. It seems to a great many observers that the dismissal of Finance Minister Nene is the most severe presidential misjudgement since President P W Botha's Rubicon speech thirty years ago. At 5 pm GMT on Wednesday night the rand was trading at R 14.56 to the dollar.
As the news of the dismissal spread, there was a very rapid deterioration to R 15.15 and the drop extended to R 15.86 by 2.30 pm on Thursday. Financial shares were hit hard on Thursday, with the banks index dropping by more than 13%, life and non-life shares by more than 9% and the financial index by more than 8%.
The impact is not likely to be brief or quickly reversed. Thursday's Economist ran an article entitled: Sprinting towards a bail-out: A respected finance minister is fired, just when his restraint is most needed.
The warning shot across South Africa's bows [the Fitch rating downgrade] could not have been clearer. Its response could not have been more foolish...Mr Zuma did not give reasons for the change [of finance minister] but many South Africans suspected it was because Mr Nene had stood up to powerful allies of the president.
The Economist is quite right. Ever since the President's decision was announced, the HSF has received one communication after another, including from ANC members, expressing grave anxiety about the decision’s economic implications. South Africa's economy is extremely vulnerable at present, with slowing world economic growth, collapsing commodity prices, a trade gap which widened in October, and the imminent prospect of a United States interest rise.
The South African Chamber of Commerce and Industry's business confidence index moved down from 92.8 in February to 82.7 in November. Business Tech reports that in the past three months, foreign investors have sold SA equities and bonds to the tune of R33bn and R7bn respectively, according to data from the Johannesburg Stock Exchange (JSE). The Mail and Guardian reported on Friday that billions of rand have been shaved from the value of government bonds.
The downgrade in Fitch's ratings will make things worse. The threat of reaching junk bond status in the foreseeable future is real. If it happens, many institutions abroad will no longer be able to own South African equities and bonds. Adjustments to holdings will be made from now on in order to avoid a fire sale if our sovereign rating drops below investment grade. Fin24 reported on Thursday that Tito Mboweni, former Governor of Reserve Bank, said at the University of the Witwatersrand on Tuesday that South Africa needs to avoid junk status with all we've got. How encouraged he must feel at Wednesday's developments.
Above all, our fiscal discipline is being closely scrutinised. It emerged during the Medium Term Budget Policy Statement in October that public servants had got wage increases well above inflation, absorbing much of a contingency reserve defined by the February budget. Higher education is going to need considerably more than was planned for in October. South African Airways is a whisker away from default. Populist and lobby pressure to destroy fiscal discipline is very great. How are we to be reassured that balance will not be lost when the President fires one finance minister to replace him with another considerably less qualified, not to say almost unknown?
We have observed throughout this year an increasing government desire to escape constitutional and legal restraint. Several aspects of the criminal justice system have been weakened. The Public Protector has come under vitriolic attack. And now we have a weakened National Treasury. All these developments are accumulating to the point where the quality of our democracy is under threat. To defend it, two political developments are essential.
The first is that the parliamentary opposition has to be unrelenting both inside and outside parliament in calling the Executive and particularly the President to account. It is a task calling for great energy and creativity. It encounters a lack of respect by government supporting MPs for the opposition, regarding it as counter-revolutionary or infantile and a general nuisance to a government with a busy legislative programme, rather than accepting it as a legitimate representative of a part of the electorate. Disrespect engenders disrespect, undermining Parliament as the prime site of an inclusive national debate.
The second is that accountability within the ruling party itself needs to be strengthened. There is plenty of disquiet within it, including concern about dropping support. An indicator is the emergence of open debate about the presidential succession two years before it needs to be settled. We have seen once before how hubris has created its own nemesis, even in happier economic times.
Clamping down on internal dissent about policies which make a difficult economic situation worse is likely to be counterproductive, even if calls for unity are made to defend the revolution in danger. The President's hardest accountability problem may be to his own supporters.
At no time since 1994 has the need for accountability and the defence of our hard-won democracy been as great as it is now. Either we move forward in consolidating it, or we shall regress to an oligarchic form of rule, inimical to the South African population at large.
Have we got it wrong? If we have, we would welcome an explanation to reassure us. The HSF has to-day written to the President, asking him to furnish us, and the country, for his decision to dismiss Mr Nene. Joining our fellow South Africans, we shall keep asking until we have an answer. Our constitutional democracy requires no less.
Francis Antonie, Director
Charles Simkins, Senior Researcher
Issued by the Helen Suzman Foundation, 11 December 2015