SA taxpayers worse off after Nenegate - economist at state capture inquiry

National Treasury economist Catherine MacLeod has said then-president Jacob Zuma's axing of Nhlanhla Nene as finance minister in 2015 had both long- and short-term effects on SA's economy.

MacLeod, who was testifying before the state capture inquiry on Tuesday, said political uncertainty had "real costs" and that Nene's removal had a "long-lasting" impact.

Zuma dropped the axe on Nene during a surprise Cabinet reshuffle in December 2015, appointing the little-known ANC backbencher and suspected Gupta family ally Des van Rooyen as his replacement. The move sent the rand into a nosedive and Zuma replaced Van Rooyen four days later.

Citing from a presentation that Treasury had compiled, MacLeod said the rand was at R14.59 to the dollar on December 9 before Nene was removed, had dropped to R15.27 by the next day and was on R15.90 by December 11.

"We also saw the price of bonds fall sharply …. One of SA’s most heavily-traded bonds went from 8.82% to 9.82%, a full percentage point higher. These were the immediate impacts," she said.

"The short-term movement for a day or two or three can be managed to an extent. Government holds a certain amount of cash that we keep for emergency situations …. Ordinarily a change in finance minister shouldn’t cause a big [reaction] if the path of government is well-set.

"In this case, there were concerns about the manner in which the minister was replaced and the individual who was replacing him and markets were not familiar with him."

MacLeod said South Africa’s sovereign spread also increased.

She explained that the spread showed how much more expensive it was for government to borrow, compared to the US, and gave an indication to how risky investors thought it was to invest in the country.

"There was an increase in emerging market spreads over the same period but much less than the SA spreads," she said.

"Political uncertainty has real costs. Nenegate was a very visible point in the overall state capture project but its impact was long-lasting because of subsequent events as well. SA citizens and taxpayers are worse off as a result of these financial market movements."

The inquiry will continue on Wednesday with evidence being presented by the commission's legal team on Eskom.