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Counting the cost of the blunders, debt and graft of the Zuma-era

18 February 2018 - 00:00 By ROXANNE HENDERSON and RAY NDLOVU

A fighter from day one. That is the legacy former president Jacob Zuma left when he resigned on Wednesday, 18 months before his second term would have finished.
Zuma's inclination to fight won admiration from a small clique of hangers-on, but for the rest of South Africa it was costly. On his watch, the economy went from bad to worse.
Unemployment was at 26.7% in the fourth quarter of last year, from 23.2% when Zuma was inaugurated as president in May 2009.
South Africa was not spared the impact of the global financial crisis of 2008-09.
The infrastructure boom ahead of the 2010 Soccer World Cup provided a brief respite and South Africa increased spending to boost the economy after the recession. The result was a growing debt-to-GDP ratio, for which Zuma cannot carry all of the blame.
But in the past five years, government debt has spiralled out of control, with the debt-to-GDP ratio now at just over 50%. High debt service costs in the public sector attributed to South African's political risk premium have became an increasing burden. The result has been what some economists call a disastrous debt trap, exacerbated by the drain that state-owned enterprises have become on the public purse. Many large parastatals, such as Eskom, have become highly inefficient and poorly governed, generating no returns for investors in recent years.Should Eskom, which has already drawn on R250-billion in government guarantees, default on its debt, the government's exposure is around 5% to 6% of the country's GDP, said BNP Paribas economist Jeffrey Schultz.
One barometer for how the country has suffered under Zuma's presidency is the rand.
At the time of his rise to power in 2009 the rand was a relatively strong R10.32 to the dollar. But in the years that followed, particularly in Zuma's second term, it weakened to a record R16.86. That was in 2016, after Zuma shocked the market when he fired finance minister Nhlanhla Nene on December 9 2015 and replaced him with Des van Rooyen.
The rand would not smile on Zuma again - until this week, when it firmed to R11.56 following his resignation.
"The true costs of Zuma's presidency may never be fully quantified," said Jannie Rossouw, head of the School of Economic and Business Sciences at the University of the Witwatersrand.
A rand value may eventually be put on the funds stolen in corrupt dealings, but it will be harder to measure the lost opportunities.
In recent years policy and political uncertainty, reflected in the mining industry for example, has led to divestment from South Africa.Woes of the Zuma economy
Debt to GDP
Bailouts to state-owned enterprises, a high public sector wage bill and poor economic growth, which means less revenue for the country, have seen the government debt-to-GDP ratio balloon during the Zuma years.
In 2008, there was a debt-to-GDP ratio of 27.8%; in 2017 the figure stood at just over 50%, with R2.4-trillion in debt. The public sector wage bill, which also swelled under Zuma, accounts for about 35% of the budget and is a major component of the national debt. - Pericles Anetos
Downgrades
Since 1994, South Africa saw its sovereign risk rating - the level of risk associated with investing in a country - improve up until 2007, when Fitch Ratings downgraded it, although the rating remained at investment grade.
After 2010, the sovereign risk rating declined further, adding to the country's borrowing costs and weakening the rand. Moody's, whose rating was one notch above investment grade in 1994, is the only agency that still has South Africa at investment grade. - Pericles AnetosMining Charter
The backbone of the economy was once mining, but in the past decade challenges such as policy uncertainty have resulted in divestment. Since 2010, the Mining Charter has been amended, reviewed and revised several times and the latest charter, released last year, cut the value of listed mining shares by R51-billion on the day. The charter is now the subject of two court cases.
Under former minister Ngoako Ramatlhodi, the Department of Mineral Resources made it mandatory for all mining companies to have a 26% BEE ownership. The department and the Chamber of Mines are waiting for a declaratory order on the "once empowered, always empowered" rule of charters 1 and 2. Mosebenzi Zwane became minister in 2015 after a draft second Mining Charter was revised. The relationship between Zwane and the industry has since hit rock-bottom. - Lutho Mtongana
State-owned enterprises
The shocking state of SOEs during Zuma's presidency has been one of the main factors in ratings downgrades as the Treasury has been forced to bail them out. Poor governance, lack of accountability and corruption have crippled Eskom, leaving it with debt of R367-billion. It has had nine CEOs since Zuma became president. SAA, the SABC, Denel and PetroSA are all problematic. - Lutho Mtongana..

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