The South African economy experienced a dramatic moment last week, which saw three Finance ministers in a week. David van Rooyen replaced Nhlanhla Nene before he too was replaced by Pravin Gordhan.
In both situations, perhaps President Jacob Zuma was trying to rescue himself and the African National Congress politically.
But also there is a side of the story, which the media in South Africa failed to acknowledge; that the President listened to and acted on people’s voices. However, what should have been seen as an act of democracy has been, for the most part, described as a sign of weakness. Zuma’s capriciousness over the Finance ministry has caused damage on the ANC’s credibility and the economy. Why would an act of democracy be seen as a sign of weakness?
While Zuma might have his own weakness as a person, there is one factor glaring that has not been explained, particularly how markets quickly reacted to the two decisions. Firstly, the rand fell to an all-time low in 19 months under Nene. It also fell in those few days under van Rooyen, before it picked when the anointed one was appointed. Could these dynamics be a result of other factors other than competence? Van Rooyen was an unknown by the core group.
These dynamics can only be understood properly within the historical context of South Africa. The South African economic structure is constructed for a specific purpose, one of which is to ensure that those who have historically owned the means of production remain safe and protected and also control and influence decision-making processes.
In the 1970s, with the rise of labour unions and some political parties, the colonial system saw the need to form alliances with some few black elites. The idea was not to include these new alliances into the core of economy, but to form a protective wall around the core group, which today continues to drive and to enjoy the economy. These initiatives were followed by several variations. In 1992, just two years before independence, new companies were formed with the support of the National Party, as a way of incorporating the black leadership into the economy. That marked the beginning of what the ANC has adopted as the Black Economic Empowerment (BEE) today.
BEE is, therefore, not a product of the ANC, as they portray it today, but of those who control the core of the economy. They had learnt their lessons from other African countries and they knew that the new black political elite had a colossal appetite for money and, thus, interests needed to be protected. They also needed to protect themselves from foreign competition, as the South African economy prepared to open up to the world with the looming independence. Therefore, to divert nationalists from nationalising the core of the economy, they needed to put cash in the pockets of the black elite and make them stakeholders of institutions that are economically and politically controlled by the core group.
Zuma admitted that he changed his decision on the Finance minister after receiving several recommendations, including from his own inner circle in the ANC. That is a diplomatic way of admitting having succumbed to pressure from among his own and those who control the economy.
The way the economy is managed goes as far as the Constitution, because incorporating the black elite was not enough to give the core group enough power to control the economy. They made it a point that the Constitution cements the historical economic imbalances by protecting property rights at a time when such property was in the hands of few before guaranteeing freedoms.
Today in South Africa, people are free to demonstrate, as long they don’t touch companies and such companies can rely
on foreign labour to continue production, as South Africans demonstrate. They also ensured that they retain the control of strategic media in South Africa, to the extent that one media group controls more than a dozen newspaper titles. This is how
Zuma’s sudden change of decision on the Finance minister has been successfully portrayed, as a weakness instead of a sign of democracy. It is not just the economy they control, but also public perception and opinion.
They control both opposition and ruling parties by giving them funding for their activities and stifle it when it is necessary.
The ANC finds itself in a difficult situation. Whether to adopt the redistributive approach to even out the historical disparities and achieve equality or to retain the status quo by not killing the goose that lays the golden egg, while the majority are sidelined. One thing is certain, that the core group is not ready for any other party, apart from the ANC, to rule South Africa because of the long term investment they put in them. The ANC can change leadership but it still has more years in power to come.
lTapiwa Gomo is a development consultant based in Pretoria, South Africa