News / Opinion

Magnus Heystek
7 minute read
3 Apr 2017
8:33 am

What Zuma’s scorched earth policy means for all of us

Magnus Heystek

A cold shoulder or a downgrade or two to boot.

President Jacob Zuma

“Would the removal of Zuma improve matters? I don’t think we’ll be seeing the back of Zuma very soon. In fact, we might even be witness to his scorched earth economic and political policies in the near future.”

This is how I ended my article Your future in the charts on Moneyweb on November 7 2016.

According to Wikipedia, a scorched earth policy “is a military strategy that targets anything that might be useful to the enemy while advancing or withdrawing from an area. Specifically, all of the assets that are used or can be used by the enemy are targeted such as food sources, transportation, communication, industrial resources and even the people in the area”.

Unless President Jacob Zuma and his cabal within the ANC can somehow be stopped in the next few months, my gloomy prognostications about the financial health for the overall economy – and the individuals who participate therein – will regrettably turn out to be prescient (sooner rather than later).

The scorched earth policy of Jacob Zuma and his clique at the inner-core of the ANC has now begun in full force. It’s becoming harder for our establishment-aligned economists and analysts to pretend that this is not happening.

Unlike the full-page advertisements taken out by large financial institutions in the weekend papers, claiming everything is alright and urging their clients “not to panic”, I disagree. Unless the massive groundswell of popular opposition against Zuma manages to lead to impeachment or his removal from office — which I doubt will succeed — we are about to witness a further collapse of investment and consumer confidence, higher unemployment, an international credit downgrade and further declines in the value of almost every investment held and owned by millions of South Africans.

My column of November 7 2016, drew the almost predictable response from a horde of sunshine economists and commentators with one, Dr Rudolph Botha, adjunct faculty member at GIBS, calling it “cynical, ill-informed and lacking in logic”.

I would love to see his comments in the wake of last week’s events.

What do I make of them?

Firstly, the timing and manner of Pravin Gordhan’s recall from London, on whatever pretext, couldn’t have been worse. Here was a man and his team on a mission to save SA from an international credit downgrade, while at the same time meeting with 50 or more of the world’s most influential fund managers, managing collectively more than $5 trillion, according to some sources. These people, whatever your view on them might be, move billions of dollars with the click of a mouse.

We need their capital. They don’t need us. We are one of about 150 economies from around the world begging for their capital to balance our books, to invest in our country in order to reduce employment by creating jobs.

Jacob Zuma, by recalling Gordhan, gave the investment community a big fat middle finger. In return, we are likely to get a cold shoulder and a downgrade or two to boot.

Second, the timing and manner of the order for Gordhan to return to SA was meant to be the final insult; an act of humiliation; evil and cruel but petty at the same time.

If it was meant to be a dagger in the back of Gordhan, it also dashed faintly-rising hopes that SA would escape or postpone a downgrade by the international credit ratings agencies.

It is my reading of the unfolding affairs last week that Zuma wanted to fire Gordhan the moment he set foot back on SA soil. It was only the unfortunate passing of ANC stalwart and Rivionia-trialist Ahmed Kathrada on Tuesday last week that interrupted Zuma’s plans by a day or three.

Most economic commentators who are not tied to one of our large financial institutions, including Prof Jannie Rossouw from the economics department at Wits, Mike Schussler and Dr Azar Jammine have over the past number of days predicted international downgrades by two if not three of the Big Three –S&P Global, Moody’s and Fitch within a matter of weeks.

The ANC seems to have accepted that a downgrade is now baked in the pie and has this week, no doubt advised by PR-supremo’s Bell Pottinger, started the public narrative that South Africa doesn’t need an international credit rating and that these agencies, by implication, are part of the internationally-funded conspiracy “white monopoly capital” to effect regime change in South Africa.

In a mostly overlooked article published in the City Press on Wednesday last week, communication minister Faith Muthambi, one of Jacob Zuma’s staunchest allies, had the following things to say:

“One would have thought that President Jacob Zuma has done something wrong in summoning the Minister of Finance Pravin Gordhan. Overlooked in this hysteria (the media headlines about Gordhan’s recall back to SA) is the obvious: all ministers serve at the pleasure and behest of the president. This is a constitutional prerogative. And President Zuma’s action in summoning any minister falls within the realm of his constitutional role and powers.” So, according to Muthambi, there is no story, now please move….

Further on she launches an astonishing attack on (a) the banks for their collusive practices and (b) the credit rating agencies, all being described as part of the plot to bring down the regime.

‘’This is exactly the situation that South Africans find themselves in. Their democracy is held at random (sic) by use of the financial markets. Leaders are then told their freedom only goes as far as satisfying the dictates of those who control the economy.”

Read the column for yourself and weep, dear reader.

I think this is going to be the line Zuma and his inner circle will take in the weeks and months ahead.  Gordhan and his deputy, Mcebisi Jonas, were part of a global financial conspiracy to overthrow the government, therefore they had to go and be replaced by people who will not stand in the way of radical economic transformation.

First it will be the National Treasury to be overrun and overhauled, then the SA Reserve Bank, only to be followed by the government pension fund and ultimately the country’s retirement funding industry. These all represent pots of gold to be plundered in the name of the radical economic transformation.

Oh, and did I forget to mention the other flank of this attack, the attack on land ownership? The first salvo has already been fired with government wanting to ban foreigners from owning farm land in SA. Once that happens, will SA farmers be told that all farmland belongs to the people, to be leased in perpetuity from the government?

Power of independent thinking

Unlike our mainstream economists and commentators, I am fortunately not linked to any large corporate financial institution, nor do I do business with government. Therefore I cannot be fired or redeployed for a badly constructed tweet, such as what happened to Chris Hart from Standard Bank and possibly to Helen Zille, DA-leader of the Western Cape, for instance.

We live in a country where, increasingly, people are fearful of speaking their mind on certain issues considered to be sensitive. The way the liberal media descended on Helen Zille reminded me of a pack of rabid dogs descending on a little rabbit which accidentally strayed into their path. It was nauseating to read the drivel and white-hate espoused by these so-called commentators.

I too visited Singapore more than a year ago, returning with very similar views than Hellen Zille. Singapore, former British colony, is today one of the most modern and forward-looking city-states in the world. All over the city will you find statues, buildings and street names still linking it to its former British rulers. The Singaporeans seemingly have made peace with what happened to them under British rule and moved on. That doesn’t mean it has forgotten or forgiven, but it does not try to airbrush the positive legacy of colonialism in that part of the world out of the history books.

That’s the nice thing about being independent. I can make up my own mind and convey this to anyone out there. What they do with that information is their business. Even though I get the usual barrage of negative comments on Moneyweb and e-mails directly, I can assure readers of this column that never, not once, has the editor of Moneyweb censored or asked me to tone down my articles, even though there often is disagreement on many issues.

Magnus Heystek is investment strategist at Brenthurst Wealth. He can be reached at magnus@heystek.co.za.

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