In a briefing this week, top executives of the credit ratings agency Moody’s said that, despite the “political noise”, South African institutions such as the judiciary, Reserve Bank, treasury and auditor general remain strong.
A political consultant to BNP Paribas Securities South Africa, Nic Borain, noted the many “political green shoots”. The reappointment of Pravin Gordhan as finance minister was the first of these. Next was the government’s engagement with business before and after the State of the Nation address.
Borain said other successes were successful tussles with SAA and its board chair, Dudu Myeni; the closure of Gupta-owned businesses’ bank accounts; and the Constitutional Court ruling that President Jacob Zuma must pay back a portion of the state money spent on nonsecurity improvements to his Nkandla home.
Futuregrowth Asset Management recently announced it would halt loans to state-owned entities, citing concerns about governance and political instability.
“Our own asset managers are closer to the action and they are voicing their concern. That is a positive,” said economist and director at Economists.co.za Mike Schussler.
He said South Africans are tied to the financial wellbeing of companies through their pensions or other investment vehicles such as unit trusts.“These assets are doing more than bringing us an income. They are saying we demand the right to have less risk and more return,” Schussler said.
Another positive is that business leaders are accompanying Gordhan to his meetings with investors. “They don’t say anything anti-Zuma but by just standing with Gordhan, they are making their stance clear.”
This week Sibanye Gold chief executive Neal Froneman backed businessperson and ANC stalwart Sipho Pityana in his call for Zuma to step down from office.
Observers say all sectors of the economy would be vulnerable to an extreme political incident potentially triggered by Zuma.
Many investors regard him as a wild card after he replaced the finance minister twice in one weekend last year.
“No part of the modern economy would be immune, as in December when the market lost billions overnight. People saw it in their pension funds and retirement annuities,” Schussler said. “If stability gets touched, it does hurt. But it is survivable.”