It is the question on the lips of many South Africans: how much is Jacob Zuma’s crisis-ridden leadership costing them? Measured by the rand, the answer may be as much as $50 billion (R675,247,648,413.81).
When Pres. Zuma, whose seven years in office have been marked by scandal and economic stagnation, withdrew a last-ditch court bid this week to block the state capture report on alleged influence-peddling, the currency jumped 1 percent against the dollar.
It gained further when the Pretoria High Court ordered the report to be released by close of business – before retreating again when its contents failed to deliver a killer blow to Zuma.
Many South Africans are now asking openly how much the currency might gain if Pres Zuma, 74, finally decides he has had enough and quits before the end of his term in 2019.
The consensus view among economists is anywhere between 10 and 15 percent. For an economy valued at R4.3 trillion in last month’s interim budget, that amounts at the top end to just shy of R676 billion.
“President Zuma’s contribution to the overall political risk assessment of South Africa is significant. He is clearly a drag on both the economic and financial sectors,” said Gary van Staden, a political analyst at NKC African Economics.
“Anywhere between 10 and 15 percent would be a minimum improvement in the currency were it not for President Zuma.”
Since 2009, Zuma has relied on the ANC’s majority in parliament to insulate him against scandals and allegations of abuse of office, including more than R246-million of improper state spending on security at his Nkandla home.
South Africa is a net importer of energy, meaning a weaker currency can feed through quickly via the fuel price into inflation, which now stands at 6.1 percent, just above a 3-6 percent target band.
The Reserve Bank has countered these price pressures by raising interest rates 200 basis points since 2014 – despite stagnant economic growth and worryingly high household debt-to-disposable income ratio of 76 percent.
The nation counted the cost of Zuma’s dabbling in the economy in December, when he fired respected Finance Minister Nhlanhla Nene and replaced him with David van Rooyen, whose previous brush with public office had been as a small-town mayor.
The rand fell 10 percent in two days before senior ANC and business leaders forced Zuma to clean up the mess by firing van Rooyen and re-appointing Pravin Gordhan, Nene’s predecessor and a figure equally well-regarded by foreign investors.
Van Rooyen – now minister for cooperative governance – has been ridiculed by the opposition as a “two-minute noodle” or “weekend special” for the brevity of his tenure as finance minister. Some critics cite his appointment as evidence of Zuma’s incompetence.
The chorus of anti-Zuma disapproval is growing by the week, drawing in big business, major unions and even senior members of the ANC.
Peter Attard-Montalto, an emerging market economist at Nomura, said the rand could bounce as much as 10 percent on a Zuma exit, which might also stay the hand of the ratings agencies threatening to cut South Africa to “junk” status next month.
Kevin Lings, chief economist at Johannesburg fund manager Stanlib, put rand fair value at 11.5 to the dollar – a 15-percent premium to its current level – and said it could reach that if Zuma left office, the downgrade threat eased and fresh life was breathed into economic policy.