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‘… over the past decade, many institutions have been forsaken or deliberately weakened for political expediency and state transformation has become so politicised that we would be forgiven for thinking that economics is all about political power.’

– Mcebisi Jonas1

Zuma burst onto the scene in the 2017 New Year promising that South Africa was entering ‘a new chapter of radical socio-economic transformation’ in which the government would use to the maximum all the levers at its disposal to drive the economic emancipation of black people.

His 2017 state-of-the-nation address was the antithesis of his 2016 speech. Whereas 12 months earlier, a seemingly contrite Zuma had affirmed the need for the whole country to unite behind the NDP to restore business confidence and investment, the Zuma of 2017 rallied his party behind an unapologetically populist message targeted at a completely different audience.

Radical socio-economic transformation meant changing the structure, institutions and patterns of ownership, management and control of the economy to break economic concentration that still resided in white business – and thus properly finish the anti-apartheid project, he said. The state would drive this process using legislation, regulations, licensing, the budget, public procurement as well as black economic empowerment (BEE) charters to the fullest extent possible.

The Black Business Council (BBC) could barely contain its delight. ‘Members of the BBC are waiting in the wings to grab such opportunities,’ enthused its president, Danisa Baloyi.2

In practice, the outlines of radical economic transformation were fuzzier. It appeared to encompass the ANC’s existing black-empowerment policies – setting aside 30% of public procurement for black businesses and potentially increasing the black ownership requirement in mining from 26% to 30% – with the supposed added kicker of accelerating land reform by amending the Constitution to allow forced expropriation without fair and just compensation. But in the absence of any policy document spelling out exactly what the phrase meant, it was impossible to decode. Perhaps that was the whole point.

‘There’s a strong argument to be made that [radical economic transformation] is nothing more than propaganda … nothing more than a provocative description for a programme of action whose credibility has collapsed under the weight of its own failure – the last-gasp attempt to inject new life into a dying corpse,’ wrote journalist Gareth van Onselen.3

If so, it had been remarkably successful in allowing Zuma to claim back the stage. It also appeared to have been devised as part of a strategic and well-oiled communications campaign that began in the months leading up to Zuma’s state-of-the-nation address.

During this period there had been a distinct increase in anti-establishment rhetoric, aimed largely at South Africa’s highly concentrated banking sector and the National Treasury. This seemed designed to lay the groundwork for Zuma’s message.

In addition to Zuma’s new slogan ‘radical economic trans­formation’, the term ‘white monopoly capital’4 started surfacing all over social media where it was wielded mainly by his supporters – or, as the University of Cape Town’s (UCT) Anthony Butler put it, ‘the Zuma camp’s social-media prostitutes’5 – to attack big business and challenge the status quo.

British PR firm Bell Pottinger, which was retained by the Guptas to burnish their image after Nenegate, was allegedly the mastermind behind this aggressive social-media campaign, according to numerous media reports.6 The firm reportedly made use of fake bloggers, commentators and Twitter bots to manipulate public opinion and divert outrage away from the Gupta family towards other imagined examples of state capture by white monopoly capital.

Though Bell Pottinger at first denied the charge, Johann Rupert confirmed that his company Richemont had ended its 20-year relationship with the PR firm based on information from ‘impeccable sources’ inside Bell Pottinger that it was indeed behind the campaign.7

Later Bell Pottinger apologised to South Africa and sacked four senior executives over the campaign. Gordhan rejected the apology as a ‘pathetic cover-up’ and an ‘insult’ to South Africans, noting that it vindicated what he’d been saying for almost two years – that the attacks on institutions such as the National Treasury were designed to malign them, distract from the looting of state resources and divide the nation along racial lines.8

Project Spider Web

By advocating policies that placed economic growth front and centre, the National Treasury found itself seemingly at odds with the notion of radical economic transformation, with its implicit focus on faster redress at all costs. In this environment it was easy to paint the Treasury as a stooge of white monopoly capital.

But the campaign to discredit the Treasury had begun much earlier, well before Nenegate. The clearest example of this was the crude smear campaign launched in August 2015 in the form of a leaked, anonymous report, titled Project Spider Web. Purportedly an intelligence document, the report was so replete with bizarre assertions, spelling errors and fanciful code names that then finance minister Nene dismissed it at first as a practical joke.

The report argued that the private sector had captured the Treasury through a cabal of white, mainly Afrikaner interests, centred around Stellenbosch University and funded by the Rupert, Oppenheimer and Rothschild families.

‘The history of this influence dates back during the early ’90s when the ANC and the National Party were negotiating the talks about talks,’ states the report. ‘The white establishment felt it was too risky to leave the running of the government solely in the hands of the ANC.’9

More than a dozen senior Treasury officials, claims the report, were under the influence of ‘the white establishment’, which allowed it to control both monetary and fiscal policy, including the process of developing and adjusting the budget.

Among those singled out were Trevor Manuel, whose code name was apparently the ‘King of Leaves’ and his wife, Maria Ramos, former Treasury director-general and current Barclays Africa Group CEO, the ‘Queen of Leaves’.

Mcebisi Jonas, who was purportedly the chairperson of Project Spider Web, was dubbed ‘the Fox’. The Treasury’s chief procurement officer, Kenneth Brown, was ‘the Tiger’. Andrew Donaldson, the then head of the Government Technical Advisory Centre, was ‘the Emperor’, and Daniel Matjila, a man with a PhD in applied mathematics, was said to be the CEO of the project and codenamed ‘the Iron Master’ – like something straight out of Dungeons and Dragons.

Nene’s director-general, Lungisa Fuzile, recalls how, at around that time, one of his deputy director-generals walked into his office and asked ‘with teary eyes’ whether he was aware that the Treasury was under attack. ‘I tried to play it down because I saw how distressed this colleague was,’ said Fuzile, ‘but it got me to reflect, and even before 9/12,10 I thought maybe there was something in what he was saying.’11

Responding to Project Spider Web in a press statement, the Treasury said that although the document was baseless, it ‘seemed designed to sow seeds of suspicion and may be motivated by an inexplicable desire to undermine and destabilise the institu­tion’.12

It appeared as though the Treasury was going to be the next target of those bent on undermining state institutions. Not four months later, Nene was out of a job.

By 2016, the narrative that the Treasury had too much power to the point that it could frustrate political decisions was well worn – even though the reality is that all fiscal-policy decisions (except perhaps some finer details of tax policy) are taken by executive structures and the budget is signed off by the whole cabinet. Moreover, the president appoints the cabinet ministerial committee, which advises the cabinet on budget allocations, and he chairs the committee when it decides on in-year budget adjustments.

Despite this, there was an increasing tendency by some in govern­ment to disown the tough decisions they’d been party to, said Fuzile: ‘So, in a way, an impression was being created that National Treasury or Minister Gordhan was usurping the party or the government … but not everyone bought this story.’

In 2017 the rhetoric was ratcheted up to a higher level. The Treasury, it was said, was now anti-transformation and Gordhan was an ‘impimpi’ (spy) for monopoly capital, according to the ANC Youth League, a dangerous insult in the context of the ANC’s struggle against apartheid.13

But Gordhan and Jonas also had their defenders. According to Fuzile, it was the increasingly vocal support that Gordhan and his team received from various cabinet ministers, other officials in government and the ANC, as well as from ordinary South Africans, that buoyed Gordhan up through his travails, and this was why Treasury officials didn’t quit under the pressure.

‘Gordhan is extraordinarily strong … an activist through and through,’ said Fuzile. ‘He has an amazing ability to focus on the big picture and the higher purpose, and that enables him to see through all the distractions.’

After serving nearly 20 years at the Treasury, what will remain engraved on Fuzile’s memory is how the institution was able to take decisive, bold and even politically unpopular decisions in times of crisis.

He believes that what Manuel, Nene and Gordhan all had in common, apart from being hard-working and their openness to frank debate, was that they were constitutionalists – people whose first point of reference in any decision was the supremacy of the Constitution and, after that, all other laws and prescripts that governed the management of public money.

‘This culture is what has built the Treasury into such a formidable institution,’ Fuzile said. ‘It taught me that when you have to take difficult decisions, you start from the position of what is for the good of the country, not what is populist. I will make so bold as to say that [in times of crisis] the leadership of the institution rose to the occasion.’

Gordhan was not afraid to take an unpopular stance on the subject of transformation, even though he must have known it would play into his enemies’ hands. Speaking in Johannesburg towards the end of 2016 he said: ‘The flip side of this transformation, the rotten product in the gift wrap, is what is called rent-seeking. It means every time [we] want to do something, [we] say it is part of transformation. But in the meantime, it means giving contracts to my pals in closets.’14

Gordhan used the 2017 budget in an attempt to reframe the transformation debate in a more constructive way. He agreed with Zuma that too little had changed in the structure of the economy and patterns of wealth accumulation. But while he accepted that growth without transformation would only reinforce the inequitable patterns of wealth inherited from the past, he also acknowledged that there was a flip side: ‘transformation without economic growth would be narrow and unsustainable’.15

He went on to use the word ‘transformation’ more than 50 times in his speech – only he stressed that the kind of transformation South Africa needed was one that was mass-based, and deepened democracy, entrenched open, transparent governance and the rule of law, and was judged by its ability to create jobs and reduce poverty and inequality – all the things that South Africa was failing at.

In Gordhan’s hands, the rhetoric of radical economic trans­formation, which Zuma had wielded as a racially divisive threat, became recast as an all-embracing call to every South African to participate in ‘inclusive economic transformation’ in order to return South Africa to a path of rising per capita incomes across the board.

For Gordhan, transformative growth was an invitation to the private sector, not a club to beat it with. It was not obsessed with narrow transformation that benefited a well-connected elite, but the creation of jobs and opportunities so as to lift the masses out of poverty.

On the other hand, Zuma, by subsequently calling for the Constitution to be amended to allow for the expropriation of land without just and equitable compensation, made it clear that his vision of radical transformation was infused with an asset-grabbing mindset.

For Gordhan, there was no need to abandon the Constitution, radicalise existing policy, or demonise whites to achieve this. The NDP had already provided the blueprint for how to go about this, he said. He even laid out the required reforms: improving education and skills development; strengthening competition laws to reduce barriers to business entry; exposing SOEs to private-sector competition; providing support for labour-intensive sectors (including agriculture, agro-processing and tourism); and overcoming the spatial fragmentation of South Africa’s cities.

He even invoked a resolution from the ANC’s 1969 policy conference in Tanzania, where the party had agreed that ‘… our nationalism must not be confused with chauvinism or [the] narrow nationalism of a previous epoch. It must not be confused with the classical drive by an elitist group among the oppressed people to gain ascendancy so that they can replace the oppressor in the exploitation of the mass[es].’16

And so the battle lines were drawn between those in the ANC, like Zuma, who were interested in a narrow, nationalistic form of transformation, and those, like Gordhan, who believed in the imperative of reducing substantive inequality.

The battle was complicated by the fact that the ANC had begun resuscitating its populist and anti-white rhetoric, partly because of its failure to improve living standards for many and partly to counter the inroads being made by Julius Malema’s EFF on its voter base.

Political analyst R.W. Johnson argued that, whereas under Nelson Mandela the ANC had been proudly non-racial, as the government’s economic blunders became increasingly apparent its attitude changed. At the same time, the ANC had watched with alarm as the radical, anti-white rhetoric of the EFF had gained traction. ‘This panics [the ANC] completely and its response is to attempt to ensure that, whatever else, it will not be outflanked on that theme. It must fight to ensure that racial nationalism works in its favour and not in Malema’s,’ Johnson said. ‘Thus whites find themselves on the wrong end of a Dutch auction on anti-white racism.’17

At the start of 2017, political analyst Justice Malala warned South Africans to brace themselves for escalating rhetoric about transformation and race over the course of the year as politicians jostled for popularity in the run-up to the ANC’s electoral conference in December. ‘I foresee an era of major anxiety and tumult as the redress rhetoric is cranked up,’ he wrote. But this should not suggest that the party’s leaders actually cared about policy formulation because, as Malala pointed out, they would be ‘too busy fighting and using race in an attempt to appear radical’.18

Indeed, the air was thick with the phrase ‘radical economic transformation,’ wrote BDFM editor-in-chief Peter Bruce, who described it as ‘a piece of political codswallop so astronomic even Jacob Zuma was reduced to calling it “radical economic whatwhat” in a speech the other day. No wonder he won’t say what it means; he can’t remember its name.’19

Though it was all very well poking fun at Zuma’s radical economic claptrap, the fact that he had unilaterally announced a new economic-policy approach raised serious economic risks. For starters, the fantasy of radical economic transformation and its handmaiden, white monopoly capital, were irreconcilable with the NDP. Adopted by government in 2014 but mostly ignored, the NDP was based on the notion that South Africans had to get past party-political differences to grow the economy and that growth needed to be the yardstick against which all policies were measured.

To the extent that radical economic transformation and white mono­poly capital placed the blame for South Africa’s lack of growth and transformation on the white community, they tacitly absolved the state for having failed to implement the NDP, and for having made so little progress in reducing unemployment, pover­ty and inequality despite having had more than 20 years in power.

But since these two slogans, cooked up in smoky back rooms in Saxonwold, were essentially devoid of content, the policy incoherence and paralysis that South Africa had been enduring for years were likely to deepen. No serious commentator believed that Zuma or his chosen successor, Nkosazana Dlamini-Zuma, had any intention of wrecking the economy by implementing Zimbabwe-style land grabs or nationalising industry. But, in that case, what would they implement? More of the same stasis and drift were all but guaranteed on their watch.

The other problem was that Zuma’s appeal to nationalistic, radical solutions had real resonance, grounded, as it was, in the lived experience of many black people. Transformation had to be accelerated, he said, because political freedom was incomplete without economic emancipation. The income gap between blacks and whites remained huge, and there could be no sustainability in any economy where the majority of black people were still excluded.20

This is, of course, 100% true. South Africa is one of the most unequal economies on the planet (a theme we will return to in Chapter 8). Not only is this economically unsustainable, but it is also morally repugnant. What wasn’t helpful, however, was for Zuma to manipulate statistics in his state-of-the-nation address to pretend that nothing had been achieved in the past 20 years and to resort to divisive, identity politics based on the fiction of white monopoly capital to shore up his failing popularity.

Although Zuma bemoaned the fact that only 10% of the top 100 companies on the JSE were directly owned by black South Africans, what he didn’t disclose was that this number rose to 23% when indirect shareholdings through pension funds, unit trusts and life policies were included. This proportion exceeds the 22% share (direct plus indirect) held by white South Africans – surely a remarkable achievement.21

Take Anglo American. Its CEO, Mark Cutifani, estimated that direct black ownership of Anglo’s South African operating assets was 27% but that this rose to more than 45% once the participation by black South Africans in pension funds and as investors on the JSE was taken into account.

‘Many people still don’t understand that the owners of most South African publicly-listed mining companies are not the Randlords or magnates of the previous generations, but rather ordinary pension- and investment-fund owners – that is, average South African citizens of all races: black, white, coloured and Indian,’ he said. ‘In today’s world, capital has no colour; it is a powerful tool that can help create a better country for all.’22

This is what Zuma should have said in his state-of-the-nation address had he been interested in growing the economy, restoring confidence and building national unity. Instead, it was likely that Zuma’s invocation of a battle between ‘us’ and ‘them’ based on the fiction of white monopoly capital was retarding rather than advancing change, argued Business Day editor, Tim Cohen.23

This is because what Zuma described suggested that the government should deepen its existing approach to trans­formation, whereas the opposite is required – the government needs to change its existing approach to running the economy and drop its narrow obsession with the ownership aspect of transformation.

‘Zuma … could have said the economy is naturally evolving to reflect its true, multiracial nature. This is indeed a day to celebrate,’ wrote Cohen. ‘Instead, he reaches for his inner Donald Trump, citing statistics in an intellectually dishonest way to support an ideology of “us” and “them” …’24

The analogy is apt, as the resurgence of identity politics and intellectually dishonest race-baiting in South Africa paralleled what was happening in other parts of the world, especially in the US under its loathsome white-nationalist president, Donald Trump.

Trump was dangerously reshaping the national agenda around a sense of ‘us’ that includes only ‘real’ Americans, according to Harvard development economist Ricardo Hausmann. ‘[Trump’s] identity politics is a defence of a certain dominant ethnicity,’ Hausmann said on a visit to South Africa. ‘That this will be done at some economic cost is the same danger faced by South Africa.’25

Former Public Protector Thuli Madonsela also registered her concern over the rise of identity politics in South Africa, saying it made her ‘afraid’ for the country. Speaking to Al Jazeera at Harvard Law School in Boston, Madonsela said that by fuelling ethnic divides, politicians in South Africa encouraged people to direct the fight at white people instead of at overcoming inequality. This allowed them to divert attention away from how they were looting the state and destroying the economy.26

This was certainly the experience of Helen Zille, who found herself in the centre of a furious race row for Tweeting after a visit to Singapore in March 2017 that the legacy of colonialism wasn’t entirely negative. ‘For those claiming the legacy of colonialism was ONLY negative, think of our independent judiciary, transport, infrastructure, piped water etc,’ she wrote.

The whole point of Zille’s trip to Singapore was to try to understand why some former colonies had become inclusive, spectacularly successful societies while others were divided, dismal failures. The last thing she had expected was to learn by example when her Tweet ignited a storm of invective.

In trying to make sense of it all, Zille opined in a Sunday Times essay27 that a tectonic shift had occurred in South African politics while white society hadn’t been paying attention. The Mandela era, with its inclusivity, had come to an end and emerging from South Africa’s universities, she argued, was a new set of ideas rooted in the writings of Afro-Caribbean revolutionary and philosopher Frantz Fanon, and codified in critical race theory that regarded ‘whiteness’ and ‘whites’ as the key obstacle to the progress of black people.

‘The virus of anti-whiteness (rooted in the negative legacy of colonialism) has spread rapidly through South Africa’s born-free generation, especially the young, educated elite,’ she said. ‘It’s an attractive philosophy, partly because it romanticises revolution and partly because it turns whites into an easy target, a scapegoat to avoid facing the real issues that prevent progress and economic inclusion in South Africa.’

In the process, the buzzword ‘transformation’ had been replaced by ‘decolonisation’, said Zille. Since all whites were by definition colonisers, this allowed for the condemnation of a whole category of people based on their race.28

Zille’s characterisation of the born-free generation as in­fected with a virus of virulent anti-white racism was a harsh and sweeping conclusion, since many of these young people had marched peacefully, united across race and class barriers, to demand Zuma’s resignation after his sacking of Gordhan. Some of them probably even voted for the DA.

But she was right about one thing – Bell Pottinger had not plucked the phrase ‘white monopoly capital’ from thin air. In Zille’s words, they had ‘tapped into a pumping vein of vitriolic race invective currently flowing through South Africa’s body politic’. The country ignored this tendency at its peril, she warned. ‘There is a genuine risk that it will reverse the progress of our decades-long struggle for a non-racial, inclusive democracy.’

SA on brink of making a ‘historic mistake’

Sometimes it takes an outsider with no political affiliation or racial baggage to see things clearly and say it like it is. In the same month that Zille was taking intense flak for her idiotic suggestion that colonialism had an upside, Hausmann, a former Venezuelan minister of planning, visited South Africa. He knew the country very well, having chaired Trevor Manuel’s International Growth Advisory Panel in 2008.

Hausmann took in the seething mass of misanthropy that confronted him and, being a first-class economist, distilled the country’s problems into a series of pithy observations. He was alarmed at the populist turn that South African politics had taken, based on ‘the fundamental lie’ of white monopoly capital. Scapegoating the white population and the firms that existed (no matter who owned them) was a dangerous and extremely counterproductive move, he said.

While there was no doubt that South Africa needed economic transformation because there were too many unemployed people and too many people living in poverty, Hausmann felt that the white monopoly capital narrative, which proposed radical economic transformation as its solution, was ‘a recipe for failure’.29

It meant that South Africa continued to take ‘somewhat aggressive­ly’ from the firms that existed, instead of focusing on encouraging new firms that would create new jobs for the 9 million unemployed.

‘I can understand the political moment in which these decisions are made, but that doesn’t make them right,’ he said. ‘These are historic mistakes. Countries can take wrong turns and get into dead-end streets and that is my fear for South Africa.’30

The real inequality that South Africa suffered from was between those with jobs and those without, Hausmann explained. The problem, in his view, was that millions of people were unproductive or unemployed. This meant that South Africa had to focus on entrepreneurship and creating new enterprises, many of them, rather than tinkering with ownership and trying to transform the few enterprises it already had.

‘It’s not about changing the asset ownership for a few rich blacks in the country, it’s about empowering the millions,’ he said. In short, South Africa’s problem is that there is ‘too much of an obsession with making the top of society black and not enough focus on making the bottom of society better’.31

It is common cause that the way South Africa has designed and administered BEE, with its narrow focus on transferring firm ownership at the top rather than creating jobs at the bottom, has largely benefited a small, black elite. In some cases this has amounted to little more than replacing white capitalists with black ones. The government has belatedly acknowledged the need to get black people involved in starting their own businesses but its much-vaunted Black Industrialist Programme supported just 27 entrepreneurs. And the programme had cost the state about R1,5 billion, or roughly R55 million per entrepreneur.32

Commenting on the term ‘white monopoly capital’, Madonsela pointed out that if capital was the problem, then it was the problem – regardless of whether it was black or white capital. ‘I think that white monopoly capital is a narrative brought in to place blame on something for people’s suffering,’ she concluded, ‘and everyone who disagrees is an agent.’33

It was quite possible for South Africa to create a system that allowed for equal distribution ‘without damning white people’, she argued. Education, for example, was a great equaliser, she said, but South Africa had neglected to invest in education in favour of BEE.

The chess master sacrifices his bishop

The axe finally fell on a Thursday at midnight – an appropriate time for the final step in the execution of President Zuma’s Machiavellian plot. Gordhan learnt that he’d been ejected from the cabinet the same way the rest of the population did – in a televised announcement. Zuma said, with a straight face, that he was making changes to his national executive ‘in order to improve efficiency and effectiveness’.

In the ensuing purge, four other ministers lost their jobs, but the cabinet’s worst performers – Bathabile Dlamini (social develop­ment), Faith Muthambi (communications) and Mosebenzi Zwane (mineral resources) – were all retained.

At least Zuma had done Nene the courtesy of informing him face to face that his services would no longer be required and softened the blow with the promise of a job heading up the African Regional Centre of the Brics Bank (though it never materialised). But the way in which Gordhan was abruptly recalled from an international investment roadshow in London four days before being culled seemed designed to inflict the maximum humiliation and distress on the entire delegation. The damage to South Africa’s international standing was incalculable – Gordhan had been meeting 60 foreign investors, representing $2,5 trillion, including BlackRock, Aberdeen, Vanguard and MetLife.

Gordhan said he was never given any reason for his dismissal but the consensus was that Zuma wanted Gordhan removed because of the Treasury’s attempts to stone-wall his nuclear ambitions, Gordhan’s deep antipathy towards SARS commissioner Tom Moyane, and his refusal to lubricate the Guptas’ dealings with local banks, nearly all of which had closed their firms’ accounts.

In advance of the cabinet reshuffle, media outlets were flooded with a laughable intelligence report, entitled Operation Checkmate, which alleged that Gordhan’s international investor trip had really been about mobilising funds to oust the president.

Apparently Zuma is a very good chess player. Some analysts even call him a master strategist. If anyone was checkmated, it was Zuma’s opponents in the ANC. Because although the backlash from every sector of society (including the ANC’s alliance partners, the Congress of South African Trade Unions (Cosatu) and the South African Communist Party (SACP)) was unprecedented, and although South Africa was swiftly downgraded to junk status by S&P and Fitch, the ANC ultimately closed ranks to protect Zuma.

‘He is an expert strategist who for years has been using his superior battle skills to climb to the top and is not planning to descend from the throne any time soon,’ said political analyst Melanie Verwoerd, ‘Patience is his strength, waiting for people to make their moves before he makes his counter-moves. At times it might look as if he is losing the battle or even losing interest, but that is all part of the stealth strategy he uses. And remember the famous laugh? Nothing to do with nervousness, the clever people tell me, he is truly having fun.’34

For Attard Montalto, the failure of the ANC’s NEC to recall Zuma as state president at its meeting in May 2017, not two months after his cabinet reshuffle, was proof that Zuma had ‘total control of the political strategic gameplay that is the ANC’.35 Attard Montalto had consistently warned that investors and the financial markets were underestimating Zuma’s political capital and taking too sanguine a view of political risk in the country.

It was the second time in less than a year that Zuma had withstood a motion brought by NEC members to have him removed from office. The fact that he emerged victorious at a time when the evidence of his being at the heart of a massive conspiracy to capture and loot the state was becoming insurmountable suggested that the president was stronger than many believed.

‘The anti-Zuma crowd are too scared or too compromised or too threatened to speak out,’ said Attard Montalto, noting reports that only 18 NEC members had been in favour of the motion to recall Zuma while 54 had spoken against it.36

In a somewhat sinister turn of events, Zuma was quoted as having warned the NEC at the meeting that he should not be pushed too far and that if people continued criticising him in public ‘they would see [what happens]’.37

Verwoerd sensed that Zuma was planning a political ambush that would thwart his opponents once and for all. If he did launch a counter-attack, what would it look like? ‘I can only guess,’ wrote Verwoerd, ‘but making the country ungovernable, damaging disclosures (truthful or otherwise) about the other side or rigging the elections all seem plausible options.’38

The president had left South Africa in little doubt that he would use his power to advance his own interests and defeat his opponents regardless of the impact this was having on the party, the economy or the country. This fuelled the view that Zuma would ensure Dlamini-Zuma became the next president of the ANC, even if it meant manipulating the election process or, at worst, collapsing the December conference into chaos, to ensure victory for his camp.

A bunch of wild gunmen running amok

It was fast becoming clear that 2017 was going to be the year that would make or break the ANC, and possibly the country as a whole. The forces unleashed by the venal elite centred on Zuma and the Gupta family, culminating in Zuma’s midnight cabinet reshuffle, had driven the nation to the brink. If the country continued on this trajectory, it would most likely inflame civil unrest, split the ANC and, in time, invite a fiscal crisis.

The rating agencies left the country in no doubt: the ousting of Gordhan had imperilled the country’s fiscal and growth prospects. By pulling the rug out from under the Treasury, Zuma had not only halted the fragile recovery that appeared to be taking shape after the end of the drought, but also erased years of fiscal and economic progress. With the stroke of a pen, Zuma had labelled the country as one that placed little value on economic-policy stability, business confidence or the credibility of its Treasury – all ingredients essential to attracting investment.

In fact, S&P’s downgrading of South Africa to junk status (BB+) three days after the reshuffle took the country back 17 years to where it had been in 2000, the year in which it first received an investment-grade rating from the agency.

‘The economy now runs an increased risk of getting stuck in a prolonged period of stagnation as South Africa could increasingly fall off global investor radar screens, given political and policy concerns amid a poorly performing economy,’ said Old Mutual Investments chief economist Rian le Roux. ‘In short, South Africa has dealt itself a serious economic blow, something that may be hard to recover from.’39

Instead of real gross domestic product (GDP) growth heading back above 1% in 2017 in line with the prevailing consensus, the country faced another year of close to zero growth as the reshuffle had annihilated what little remained of investor and business confidence.

The fear was that with Gordhan out of the way, business-friendly reforms would grind to a halt, the financial mismanagement of SOEs would continue unchecked, and the tight reins on fiscal spending would be loosened, leading to more growth-sapping tax hikes and multiple credit-rating downgrades.

The new finance minister, Malusi Gigaba, a former ANC Youth League leader and previous Minister of Home Affairs and before that, of public enterprises, arrived on day one spouting Zuma’s message of radical economic transformation. Gigaba repeated the false narrative, circulated by Zuma’s camp, that the Treasury had been captured by big business (read: ‘white monopoly capital’) and was out of touch with the needs of the people.

‘For too long, there has been a narrative or perception around Treasury, that it belongs primarily and exclusively to “orthodox” economists, big business, powerful interests and international investors,’ said Gigaba. ‘With respect, this is a people’s government.’40

He went on to perpetuate the myth that had been gaining currency in the ANC that South Africa’s economic and fiscal policies had failed to reduce inequality because they were not progressive enough (see the discussion in Chapter 8). There had to be a change in approach, Gigaba said. But, in the same breath, he promised that his new crew was ‘not a bunch of wild gunmen running amok, gung-ho into National Treasury’.41 This unfortunately conjured up precisely the image that he had hoped to avoid and made for spectacular headlines.

However, within a fortnight of his appointment – during which time Fitch had joined S&P and likewise cut the country’s rating to junk status, and Moody’s had put South Africa under review to be downgraded – Gigaba had back-pedalled furiously. Addressing investors in Cape Town on 13 April, Gigaba stressed the need for management continuity at the Treasury. He praised the ‘skilled and experienced team’ he had found there, and lauded it as ‘a strong, professional and stable institution’.42

‘Our top priority is to achieve inclusive growth,’ he said. ‘All of our national challenges will be easier to deal with if our economy is growing, even as we remain aware that growth is not automatically inclusive. Nonetheless, we would rather debate how best to share a growing pie than a shrinking one,’ he added, using the language of a Treasury insider.43

At least Gigaba had proved to be a quick learner. His comment about ‘wild gunmen running amok’ had clearly been a little too close to the bone. For his first five weeks in the finance minister’s chair, Gigaba had the benefit of the wise counsel of Lungisa Fuzile, the former director-general who had served finance ministers all the way back to Trevor Manuel.

Fuzile’s impressions of Gigaba are encouraging. Over a pot of masala tea served in a black cast-iron teapot in Cape Town’s Taj Hotel, a short walk from the Treasury’s parliamentary offices, Fuzile recalled Gigaba’s first day on the job.

‘Only hours after he was appointed, I met him and his deputy, Sfiso Buthelezi, and presented him with the S&P report. I told him both Moody’s and Fitch were readying themselves to pronounce on South Africa’s ratings.

‘They said, “What do you advise us to do?”

‘I said that they should talk to them.

‘They said, “What do you advise us to say?”’

Fuzile explained how the rating agencies would be likely to seek reassurance that, as the new minister, he would stick to the Treasury’s promise that the nuclear deal would ‘proceed only at a pace and a scale the country could afford’, nor would he allow SOEs’ debt to explode.

‘Lo and behold, a few hours later we were speaking to the rating agencies and the two of them, particularly the minister, did all the talking.’

Fuzile was impressed by Gigaba’s quick grasp of the issues. This was cemented a few weeks later at the IMF spring meetings in Washington and on an international roadshow to New York and Boston, where he felt that Gigaba and Buthelezi had held their own in the rarefied world of high finance.

‘He strikes me as being incredibly smart,’ said Fuzile. ‘There is no reason on the basis of my interaction with them to question their intentions or their ability to grow into the role and to cut it in the end. Time will tell.’

Reading straight from Fuzile’s playbook, Gigaba promised investors that he would act decisively to improve the governance and financial sustainability of SOEs, would stick to the medium-term fiscal-consolidation plan put in place by Gordhan, and any procurement of nuclear energy would follow the necessary legal prescripts and ‘proceed at a pace and scale the country could afford’.44 He also invoked the NDP as the core of South Africa’s long-term development vision and, according to Fuzile, this was genuine.

Even highly sceptical investment bankers warmed to Gigaba once they had sat down with him. Though not all were convinced, several were impressed by how quickly he had absorbed the detail of his portfolio and was taking proactive steps to safeguard the fiscus. He seemed to be doing far more than mouthing platitudes from a prepared script.

Gigaba’s promises of sticking to Gordhan’s fiscal-consolidation path were very reassuring, but they were almost certainly going to prove impossible for him to honour. For even if he was able to keep to the expenditure ceiling, net government debt would probably refuse to stabilise at 50% of GDP over the coming three years, as promised, unless, by some miracle, growth recovered.

There was just no getting away from the fact that the Treasury’s fiscal plan hinged on the assumption that growth would recover sustainably to 2% by 2018 and then keep climbing – a hope that Zuma’s cabinet reshuffle and the ensuing recession had shattered conclusively.

In fact, it had been clear for some years that South Africa’s long-term fiscal trajectory wasn’t going to be sustainable – even under Gordhan – without further adjustments. Under Gigaba, it all looked hopeless. But it was doubtful in those early days whether Gigaba himself realised that while his instructions from Zuma might have been to say whatever was necessary to avoid an economic meltdown, he would be powerless to prevent it – even with the shiny new wings of finance minister pinned to his epaulettes.45

It seemed inevitable that Zuma and his new cabinet of novices and useful idiots were going to break what little was left of the South African economy.

Fuzile put the odds of Gigaba managing to pull a rabbit out of his fiscal hat at about 50:50. But, amazingly, this wasn’t because Fuzile was worried about Gigaba going on a populist spending spree. Rather, he was worried that Gigaba might tighten conditions too much too fast in an effort to prove himself truly independent of Zuma and the Guptas, and worthy of the title of finance minister. Zuma, in his desire to prove he wasn’t leading South Africa to perdition, might even go along with him. It would certainly be a huge upside surprise if Gigaba ended up pursuing fiscal policy more conservatively than Gordhan had.

There was even an outside chance that Gigaba, by virtue of possessing greater political capital and having Zuma’s trust, might manage to pull the rest of the government along with him. If so, he might be able to accelerate the pace of structural reform and raise the growth rate. Could Gigaba perhaps succeed where Gordhan had failed?

Was it possible that Gigaba might ‘do a Mogoeng Mogoeng’46 on Zuma and rise to the occasion demanded by such a senior portfolio? Surely Gigaba must have realised that this was an incredible opportunity to make his mark on the country and that, if he handled it correctly, he might even become president himself one day.

During Gigaba’s first few weeks on the job, this optimistic view began to gain currency. And then, in May, the cache of Gupta emails hit the press. One of the first cabinet ministers to be implicated was Gigaba for having made a board appointment at Transnet that appeared designed to facilitate the Guptas’ access to R5,3 billion in kickbacks on the SOE’s R50 billion locomotive-procurement deal, among other things.

It subsequently emerged that Gigaba had appointed a whole host of directors with Gupta links to the boards of Transnet, Eskom and Denel. ‘The door to special favours for the Guptas seems to have been opened from the moment Gigaba was appointed Public Enterprises minister in November 2010 and continued through to his move to the Department of Home Affairs in 2014,’ concluded a Business Day investigation.47

But even if Gigaba hadn’t been implicated, it seemed highly improbable that he would succeed in meeting the rating agencies’ dual requirements of enforcing fiscal discipline and raising the growth rate. Not even Gordhan had managed to do the latter – and this was before the economy had been saddled with the burden of a junk rating.

The problem was that following five years of slowing growth and mounting debt, everything had come to depend on South Africa’s ability to raise the growth rate. Given the downgrades, and all that these implied in terms of weaker public finances, lower confidence and depressed investment, the country faced the prospect of bumping along the bottom with growth rates of around 1% for several more years.

In this environment, South Africa can expect investment and employment growth to contract, per capita GDP to shrink, and social expectations to remain unmet. Certainly, any socio-economic transformation that is likely to occur is bound to be very far from the mass economic emancipation that Zuma had promised.

And if Zuma’s new troops respond to these pressures with further policy bungling and by ratcheting up their anti-white, populist rhetoric in the same way they laid into the rating agencies for daring to downgrade South Africa, it will only cement South Africa’s down­ward slide.

‘It is now in the hands of civil society and our political leaders to pull South Africa decisively away from a situation that, if allowed to go unchecked, could potentially turn into a full-blown economic, political and social disaster,’ warned Le Roux.48

The muddling-through, loop-en-val49 option of economic stagna­tion was beginning to look quite palatable next to this looming alternative. The situation had many South Africans running scared, wondering whether Zuma had set the country on an irrevocable path to a debt crisis.

Though it was clear that South Africa still had a long way to fall before it reached rock bottom, it was equally clear that Zuma’s juggernaut had to be halted before it did any more damage. The country had to find a way to stop the rot and discredit the idea that adhering to orthodox economic policies was a ploy to maintain the hegemony of white monopoly capital, or it was going to make a mistake of historic proportions.