Get more Mail & Guardian
Subscribe or Login

NeneGate: The financial cost of political uncertainty

The financial impact of Nhlanhla Nene’s sacking were felt for years after his removal as finance minister, the Zondo commission of inquiry into state capture heard on Tuesday.

During her testimony, national treasury economist Catherine MacLeod told the commission — chaired by Deputy Chief Justice Raymond Zondo — that Nene’s December 2015 axing had long-term effects on the economy.

According to MacLeod, Nene’s removal as finance minister was a very visible point of the alleged state capture project to investors. The market reaction was a culmination of the events signalling state capture in the lead-up to Nene’s dismissal and it built up over time, MacLeod said.

MacLeod’s evidence corroborated elements of treasury director general Dondo Mogajane’s testimony. In November last year, Mogajane was tasked by the commission to compile information relating to the impact of “Nene Gate” on the country’s national debt.

READ MORE: ‘Van Rooyen did not know his advisers’ — treasury DG

Nene was unceremoniously fired by former president Jacob Zuma on December 9 2015. ANC backbencher Des van Rooyen was appointed to replace Nene, but after a four-day stint as finance minister, Pravin Gordhan was asked to take over.

Nene appeared before the commission last October. During his testimony, he recounted the pressure he allegedly encountered to approve costly government projects like the controversial nuclear deal.

On Tuesday, MacLeod emphasised the importance of the context surrounding Nene’s firing. She conceded that Van Rooyen’s relative lack of credentials did have an impact on the perceived risk to investors. But if someone more qualified than Van Rooyen was appointed, and that person was still associated with the state capture project, a similar impact would have occurred, MacLeod said.

She further added that change in ministers increased investor’s perception of risk. “The investors were also aware of what the change in ministers might mean for the fiscus,” MacLeod said, concluding that investors became aware that the change in ministers would mean that government spending on costly projects might go unchecked.

MacLeod noted that, though Gordhan’s appointment stabilised the market for a period, the impact on the economy persisted.

The rand was much weaker a year after Nene’s axing than it was the year before Nene Gate, MacLeod said.

“Political uncertainty has real costs … South African citizens and taxpayers are worse off,” she explained.

South Africa has not run a budget surplus since Nene was given his marching orders, MacLeod noted. Revenues have underperformed and this has put pressure on the country’s borrowing, she said.

She explained that when government incurs debt, less money can be prioritised for social priorities.

When asked about the perception that the rand can be easily picked up again after a dramatic fall, MacLeod said that anyone who thinks this does not appreciate the impact of financial asset prices on ordinary citizens.

Vote for an informed choice

We’re dropping the paywall this week so that everyone can access all our stories for free, and get the information they need in the run up to the local government elections. For the latest updates and political analysis, sign up to our daily elections newsletter.

If our coverage helps inform your decision, cast your vote for an informed public and join our subscriber community. Right now, a full year’s access is just R510, half the usual cost. Subscribers get access to all our best journalism, subscriber-only newsletters, events and a weekly cryptic crossword.

Sarah Smit
Sarah Smit
Sarah Smit is a general news reporter at the Mail & Guardian. She covers topics relating to labour, corruption and the law.

Related stories

WELCOME TO YOUR M&G

Already a subscriber? Sign in here

Advertising

Latest stories

Paddy Harper: Will the Covid-19 cigarette ban come back to...

Flashback of nicotine deprivation and not poor service delivery may see a run on the polls on Monday

Eskom resorts to stage four load-shedding

Stage-four outages will continue until Friday after the loss of two units during the night, and three in total at Medupi, Kusile and Matla power plants tripping

DA-run metro favoured in citizen satisfaction survey

Cape Town emerged as the leader on overall citizen satisfaction for the fifth consecutive year, followed by Ekurhuleni

Cities will feel the heat from climate change

South Africa’s urban areas are urban heat islands and heat waves will intensify the distress
Advertising

press releases

Loading latest Press Releases…
×