The Minister of Finance, Malusi Gigaba, needs to act decisively to stop the bleeding following his appointment of Professor Chris Malikane as his economic advisor.
Last week the minister claimed his economic advisor had been “reined in” and told to “keep quiet”.
But since being “reined in”, the minister’s economic advisor has done anything but “keep quiet”.
He was interviewed by:
- SAFM (bashing ratings agencies);
- Cape Talk (bashing the private sector);
- Sowetan (bashing the National Development Plan); and
- Rapport (warning of coming civil war).
And he appeared at the minister’s side during his international investor roadshow in the United States.
In fact, the minister’s economic advisor now denies being told to “keep quiet”, defiantly claiming there is no way the minister could tell him to “keep his mouth shut”.
This is what the minister’s economic advisor said in response to a question about the ministerial gagging order:
“No, no, no, no. People’s inference of what the minister said is wrong. There is no way the minister can tell a fellow South African to keep his mouth shut. I am an academic, I work with ideas. I have to challenge public opinions that mislead the nation. When the minister said he reined me in, he meant we should no longer focus on talking, but on doing – action that will transform the economy.”
We can only conclude that either the minister was lying when he claimed his economic advisor had been told to “keep quiet”, or he is too weak to ensure that his economic advisor does in fact “keep quiet”, and his economic advisor has gone rogue.
Whatever the case, the minister must now face up to the fact that his first few weeks on the job have been a disaster which has undermined investor confidence and fueled policy uncertainty.
The minister has tied himself into knots by:
- somersaulting from “radical economic transformation” to “inclusive economic growth”;
- attacking “orthodox” and “right wing” economists at National Treasury; and
- appointing an economic advisor who wants to turn South Africa into Venezuela.
The fact is that the minister’s economic advisor has become a political liability and it is now time for him to act decisively and stop the bleeding by cutting him loose and sending him back to the seminar room where his mad ideas about the economy will do no harm to South Africa.
The Minister of Finance, Malusi Gigaba, appeared to have distance himself from his economic advisor, Professor Chris Malikane, who’s mad ideas on the economy had shaken investor confidence, ahead of an international investor roadshow in the United States.
The minister was forced into damage control mode reassuring investors that it was not government policy to nationalize banks and publically slapped down Professor Chris Malikane like a schoolboy in a way that suggested his days were numbered.
However, nothing could be further from the truth because it has now emerged that Professor Chris Malikane accompanied the minister on the international investor roadshow in the United States.
This morning the minister’s spokesperson, Mayihlome Tshwete, posted pictures on social media of the minister and his economic advisor engaged in a convivial conversation at the International Monetary Fund in the United States. [here, here and here]
The minister’s “roadshow message”, released by National Treasury, includes a commitment to “inclusive growth, prudent fiscal discipline and sound economic policies”.
But Professor Chris Malikane’s presence sends exactly the opposite message and will be a major red flag to international financial institutions, international investors and rating agencies in the United States.
In the end, the fact that the minister invited Professor Chris Malikane to accompany him on the international roadshow raises serious questions, not only about his judgment, but also about whether he can be trusted to act in the best interests of South Africa
Note to Editors: Please find correspondence between National Treasury and Tegeta Exploration & Resources (Pty) Ltd relevant to the report discovered as a result of a request for access to information, in terms of the Promotion of Access to Information Act (No. 2 of 2000), submitted by DA Shadow Minister of Finance David Maynier MP here.
The Minister of Finance, Malusi Gigaba’s, first big test is going to be his handling of National Treasury’s final report on the review of coal contracts entered into by Tegeta Exploration & Resources (Pty) Ltd and Eskom.
The draft report reportedly finds inter alia that there was no evidence that the advance payment was used for its mining operations and recommends that the R659 million be converted to a loan with interest payable by Tegeta Exploration and Resources (Pty) Ltd.
The controversy surrounding the report is not new and exploded last year when Tegeta Exploration & Resources (Pty) Ltd threatened to apply for an urgent interdict to prevent National Treasury handing me a copy of the report, which I had requested in terms of the Promotion of Access to Information Act (No. 2 of 2000).
In a letter, dated 23 June 2016, Tegeta Exploration & Resources accused National Treasury of trying to defame their business as follows: “…your efforts to obtain our feedback on the request of Mr Maynier must be seen as an unwarranted attempt to obtain approval to publish your report to a political party with the motive of defaming our business with facts not tested or commented on.”
And Tegeta Exploration & Resources went on to threaten National Treasury as follows: “We will consider obtaining further legal advice in launching an urgent application to interdict you from releasing the report until it has been subjected to scrutiny of all parties concerned.”
Tegeta Exploration & Resources (Pty) Ltd and Eskom clearly have something to hide and have worked hard to frustrate and delay the review conducted by National Treasury.
This matter has gone on for too long and it is now imperative that the report be completed, made public and that action be taken against Tegeta Exploration & Resources (Pty) Ltd and Eskom.
I have, despite numerous requests for access to the report, in terms of the Promotion of Access to Information Act, (No. 2 of 2000), been unable to obtain a copy of the report from National Treasury.
The reply is always the same: “Your request has been assessed and it has been established that the report is not yet finalised. Some technical information was received from Eskom and this necessitated the appointment of experts to assist in reviewing it. The report will be released once the experts have completed the review process.”
However, I have not given up and on 05 April 2017 I submitted a further request for access to the report, in terms of the Promotion of Access to Information Act (No. 2 of 2000), to National Treasury.
The handling of the final report will be the first test of the minister’s willingness to stand up to his political master, Jacob Zuma, and his most important clients, the Guptas, who control Tegeta Exploration & Resources (Pty) Ltd.
The Minister of Finance, Malusi Gigaba, is in full damage control mode following the appointment of Professor Chris Malikane as his economic advisor ahead of an important international investor roadshow in the United States.
The fallout from the appointment has forced the minister to issue a media statement distancing himself from his own economic advisor’s mad ideas and reassuring investors that it is not government policy to nationalise the banks.
The fact that the minister is in damage control mode is proof enough that Professor Chris Malikane should never have been plucked out of the seminar room, where his mad ideas could do no damage to the economy, and appointed as an economic advisor, where his mad ideas can do damage to the economy.
The minister seems to think that it is possible to “firewall” himself from his own economic advisor’s mad ideas and that it is possible for his economic advisor to be left to “think aloud” as he takes on what he calls “right wing economists” at National Treasury.
This is simply impossible and will no doubt send a chill up most international investors’ spines and will ensure a hostile reception during the international investor roadshow in the United States.
The Minister of Finance, Malusi Gigaba’s, reported controversial appointment of Professor Chris Malikane as his economic advisor should come as no surprise in South Africa.
The minister set out his political agenda in his maiden press conference on 01 April 2017, which includes: transforming the economy by implementing “radical economic transformation”; and transforming National Treasury because it is dominated by “orthodox economists, big business, powerful interests and international investors”.
The appointment of Professor Chris Malikane, who appears to have been trained at the “Hugo Chavez School of Economics”, is entirely understandable and a logical consequence of the minister’s political agenda, to implement “radical economic transformation” and to take on orthodox economists at National Treasury.
The fact is that Professor Chris Malikane has been appointed precisely because he is an unorthodox economist and he will be used as a ministerial battering ram in coming battles with orthodox economists at National Treasury.
In the end, Professor Chris Malikane’s appointment will reinforce the perception held by the ratings agencies that there will be major shifts in economic policy, which will shake investor confidence and contribute to a ratings downgrade of South Africa.
The Minister of Finance, Malusi Gigaba, has committed to holding the fiscal line in South Africa.
However, a series of parliamentary questions submitted to all national departments reveals that a staggering R 13 864 380 has been spent on “sponsorships” of various institutions between 2014 and 2017.
The latest reply to parliamentary questions reveals, for example, that various state-owned companies transferred R 74 563 to the Afrikaanse Handelsinstituut, R3 725 624 to the South African Chamber of Commerce and R 1 151 393 to the Black Management Forum.
The total “sponsorship” so far is as follows: Afrikaanse Handelsinstituut (R 74 563); South African Chamber of Commerce and Industry (R 3 725 624), Black Management Forum (R1 151 393), Black Business Council (R 8 050 000), Business Unity South Africa (R 22 800) and the Progressive Business Forum (R 840 000).
And the biggest “sponsors” so far are as follows: Department of Trade and Industry (R 7 000 000), Transnet (R 5 059 002), Eskom (R 1 501 763), and Denel (R 303 615).
It boggles the mind that cash strapped state-owned enterprises would be allowed to use public funds to sponsor private institutions, especially when some of these institutions blatantly pursue a political agenda and bite the hand that feeds them.
I will therefore be requesting the Auditor-General, Kimi Makwetu, to investigate this matter when we have all the facts, based on all the replies to my parliamentary questions on this subject in Parliament.
The new Minister of Finance, Malusi Gigaba’s, attempts to restore confidence and engage ratings agencies failed to convince Fitch Ratings (“Fitch”) not to downgrade South Africa.
The fact is that the decision by Fitch to downgrade our long-term foreign currency debt and long-term local currency debt to “BB+”, or “junk status”, with a “stable outlook”, is a vote of no confidence in the minister’s ability to hold the fiscal line and stabilise debt.
This should come as no surprise given that the minister is trying to convince the ratings agencies that he can hold the fiscal line and implement “radical economic transformation”, which is simply not credible.
It’s not good enough for the minister to simply concede the ratings downgrade was a “setback”. The minister needs to roll up his sleeves and get into the fight to avoid further ratings downgrades.
The minister’s number one priority should be to avoid the nightmare scenario where massive forced selling of our debt triggers an economic meltdown that will spare nobody, rich or poor.
This could happen if Standard & Poors and Moody’s downgrade our long-term local currency debt, which makes up about 90% of our debt, to “junk status”.
However, the problem is that the ratings agencies do not trust the minister: they regarded him as a presidential minion, ready to carry out any instruction, no matter how damaging to the economy.
To re-establish trust, the minister will have to show, rather than tell, ratings agencies that he is serious about avoiding further downgrades, by delivering “quick wins”, starting with saying “no” to bailouts for “zombie” state-owned entities, like the SABC.
The appointment of the new Minister of Finance, Malusi Gigaba, has been a disaster for the economy of South Africa.
The minister’s first one hundred hours, in what he called the “hot seat”, has been a monumental shambles – the rand tanked, ten-year bond yields spiked and the country was downgraded to “junk status” by Standard & Poors.
This should not come as a surprise considering the minister’s weekend press conference, which was called to “restore confidence and restore calm”, but then proceeded to do exactly the opposite.
He suggested that:
- policy changes could be expected when he committed himself to implementing “radical economic transformation”; and
- that institutional changes could be expected at National Treasury, which he seemed to suggest was dominated by “orthodox economists, big business and international investors”.
And it got worse when the minister could not explain what “radical economic transformation” meant and was forced to concede there was still “a whole lot of clarification that we have to do.”
The minister then compounded the problem at today’s press conference, which was called to do damage control following the downgrade to “junk status”, when he suggested that he was “committed to inclusive growth”, but had not abandoned “radical economic transformation”.
The minister’s damage control exercise was an own goal because it will give oxygen to the narrative that there is policy uncertainty and it will not go down well with the ratings agencies, which are concerned about possible “policy shifts” following the midnight cabinet reshuffle.
The fact is that the minister is just not up to the job and there is now a strong impression that: Malusi Gigaba is just Des Van Rooyen in a designer suit.
Make your voice heard – NoConfidence.co.za
This evening’s decision by Standard and Poors Global Ratings Services (“Standard & Poors”) to downgrade South Africa’s sovereign credit rating to “junk status” is a clear vote of no confidence in President Zuma, and a direct result of his decision to fire Pravin Gordhan and Mcebisi Jonas last week.
President Zuma should resign immediately to allow a new administration to stabilise our economy, and to stanch this growing crisis.
Standard & Poors’ decision comes just days after President Zuma reshuffled his cabinet – sending shudders of uncertainty and volatility through our economy. International ratings agencies have long warned this government that our status is on a knife edge. Zuma has clearly learnt nothing from the market reaction to his firing of then Finance Minister Nhlanhla Nene in December 2015.
Instead of acting in the best interests of the country and its people, Zuma chose to act in his own best interests by firing Gordhan and Jonas. The negative effects of this downgrade – which is likely not to be the last – will be felt by all South Africans. This downgrade will result in higher government borrowing costs, less money for basic services, and less job creating investment.
Zuma is on a path of destruction, and must be stopped. If he does not surrender to the will of the people and resign, then Parliament must remove him by supporting our Motion of No Confidence which will come before Parliament in the coming weeks.
The Minister of Finance, Malusi Gigaba, will reportedly take office this morning at National Treasury.
The minister tried to restore confidence and calm following his shock midnight appointment.
However, there is a strong impression that President Jacob Zuma appointed the minister with the Guptas’ “stamp of approval” and that the minister is close to the Guptas.
The impression was re-enforced when the minister reportedly zig-zagged his way around hard questions about his relationship with the Guptas at his maiden press conference on the weekend.
The minister can run but he cannot hide from hard questions about his relationship with the Guptas.
That is why the minister should act in the best interests of National Treasury and issue a public statement:
- setting out all the facts including the details of every meeting, every decision, and every gift ever received from or relating to the Guptas; and
- reassuring the public that he is committed to serving the public interest rather than the private interests of the Guptas.
If the minister continues to zig-zag his way around the hard questions, he will be responsible for compromising the institutional integrity of National Treasury.
And the one thing that we simply cannot afford is for the whiff of corruption and maladministration to waft around National Treasury.