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Zuma’s judgment and its impact on business confidence

‘In the broad framework of institutional renewal, today is a further crystallisation of that theme’: Goolam Ballim – chief economist, Standard Bank Group.

NOMPU SIZIBA: Former president Jacob Zuma was sentenced to 15 months in prison by the Constitutional Court today (June 29, 2021). This for refusing to appear before the Zondo Commission, despite summons having been issued for the same. Mr Zuma has five days, including this one, within which to hand himself over to the authorities to be taken through to start serving his time.

This is an unprecedented ruling, but it is final in that the Constitutional Court is the last resort in terms of legal decisions. Politically there may be some ramifications, of course, but what does this latest development do for the perception of the country as it relates to the rule of law?

Well, to unpack this for us, I’m joined on the line by Goolam Ballim, chief economist at Standard Bank. Thank you very much Goolam, for joining us. Long time no speak or see. The decision to give former president Jacob Zuma an unsuspended sentence of 15 months is said to have sent a very strong signal to everyone. What are your thoughts around this sentence?

GOOLAM BALLIM: It is entirely meaningful, not just in symbolism insofar it upholds the rule of law, and a former apex figure of the state has been found wanting and the law has been applied equally to such a towering figure.

However, with regard to confidence, it is the accumulation of events and occurrences that will bolster confidence in a cumulative way over time. Now, what I mean by that quite simply, investors are likely looking at South Africa through three lenses. First and perhaps foremost, governance reset. The second would be the ideological centre of the government. And third would be state capacity.

Of course, there could be other items, but I just mentioned these three as I think they are the kernel. Foremost, with regard to governance, today was the celebration of the last 3.5 years or so of governance reset, of individuals who are deemed to have trespassed being held accountable. So in the broad framework of institutional renewal, today is a further crystallisation of that theme. Again, not to underscore the tectonic nature of the judgment today, it is within the grand scheme of things but one piece – a significant piece but just one piece – within the journey of governance reset.

NOMPU SIZIBA: Yes. What you’re saying makes absolute sense. It’s an accumulation of things at the judicial level, at the government governance level, and so forth. Do you think that from an investor perspective this new additional layer, which is quite important, will give more confidence in terms of wanting to invest in the country?

GOOLAM BALLIM: As I mentioned a moment ago, the two additional factors probably further form part of the formula of adjudication. So, with regard to ideology, many are looking at the incumbent, President Cyril Ramaphosa, and are praising the manner in which he is, for instance, embracing the private sector, the manner in which he is approaching through his finance minister fiscal consolidation, and other macroeconomic reforms. Most notably, for example, are the liberalisation of energy and what we’ve seen at the ports.

All of these elements speak to the ideological underpin and the idea that the President is not going to be dogged about the developmental state, but instead is going to embrace privatisation and private-sector participation. In that respect there too, over the last few weeks or so, we have witnessed movement by President Ramaphosa which has been encouraging.

Now the third leg, state capacity. This is perhaps the area where South Africa is found enormously wanting. Notwithstanding all of these very constructive endeavours with regard to accountability – and today was clearly a big chapter in that respect – we still find that throughout government the patronage network is alive and rampant. People operate and function with impunity. You don’t turn the leaf of a newspaper or digital newspaper on your computer any day without picking up some egregious act by an individual within the state apparatus. So state capacity remains deeply wanting. This is the area where investors want to see marked improvement, because ultimately it is within the micro-realm where service delivery for instance is judged. It is within this realm that we will judge the effectiveness of municipalities to deliver utilities to businesses and society. This is where the rubber hits the road in terms of corporate execution. And, as you no doubt will be aware, this is an area that is still probably months, quarters and years away from being fundamentally re-engineered.

NOMPU SIZIBA: Yes. I don’t want to conflate issues, because some things are not necessarily related to the next thing, but do you think that the decision by the Constitutional Court can give us, as South Africans, some confidence about how people are going to ultimately be dealt with when it comes to issues of state capture, for example, and the corruption and the malfeasance that you’re describing that we see through the pages of papers every single day at a government level – whether local government, national government and so on. Do you think it’s going to give us that confidence?

That’s the one side. And then on the other side there’s the culture that needs to change that you’ve spoken about, which will take years, not days, to sort out. How do you then bridge that gap if indeed you know we are satisfied with the implications of this particular court decision?

GOOLAM BALLIM: Nompumelelo, indeed today will be meaningful and bolster the sense of judicial supremacy. To bridge the two, as you say, governance is at a high level combined with the want for more effective government at local and municipal and even provincial government – how do you bridge the two?

Quite simply, foreign investors would say that in December of 2017 there was a shudder from South Africa that we would have reverberated constructively – in other words, the ascendancy of Cyril Ramaphosa to the presidency of the party, and a beginning of the end of former president Jacob Zuma.

So far as President Cyril Ramaphosa’s ascendency would have unleashed the forces of rebuilding institutions, whether it’s the NPA, the Police Services, the Hawks, or Sars investigative bodies, today would have simply been further meteoric evidence that that governance process has been unleashed. You could argue that it would send a further shudder through those that have committed malfeasance – and who have in fact flourished under the banner of impunity – that the odds are that they are going to be held to account.

So quite simply I will conclude by saying ‘gradually’ and then ‘quickly’. So gradually a little bit too long for those who are inpatient, but the last 3.5 years or so it has been gradually, with certain crescendo moments. And today has been one.

NOMPU SIZIBA: Indeed. Thank you very much for your time. That was Goolam Ballim, the chief economist at Standard Bank.

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Zuma’s sentence still does not compensate for the reality that South Africa is in many ways a failed state already. The ANC government still is riddled with crooks, thieves and hopelessly incompetents. Goolam seems to be a praise singer of the frog boiler.

I was watching Carl Niehaus reaction to the Zuma decision with horror. His absolute support for Zuma and the threats he made (to the country) is shocking. I genuinely believe I was witnessing ‘evil’.

This action is definitely a shot in the arm for business confidence, however, it remains to be seen if Mr Zuma actually goes to jail or it will be some form of house arrest or hospital stay. This is usually what happens to politically powerful figures. The public needs to see that Zuma will spend his time behind bars like everyone else. Secondly, many of the State Capture culprits are still at large and punishment has not yet been metered out for the theft of hundreds of billions of Rand. This doesn’t abode well. Until we see alot more people accounting for their actions, SA business folk will rightfully remain skeptical.

There will only be a positive impact on business confidence if the corrupt ANC go.

The Zuma show is a side show.

End of comments.





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