The South African Roller Coaster

On December 10, President Jacob Zuma fired Nhlanhla Nene, the well regarded finance minister, and replaced him with the unknown and inexperienced David van Rooven. Though Zuma is not required by the South African constitution to consult with anybody on cabinet appointments, the fact that he did not inform his cabinet or provide public explanation for his removal of Nene and appointment of van Rooven may have been the last straw.

South Africa already has been buffeted by the fall in commodity prices, uncharacteristically low growth rates, and fears that the widely anticipated U.S. Federal Reserve’s increase in interest rates will attract investor funds from emerging markets. The Rand, the South African currency, plunged, the Johannesburg Stock exchange indexes swooned, and government borrowing costs jumped. Business commentary was uniformly hostile to Nene’s firing, with dire predictions that the new appointment foreshadowed an end to South Africa’s hitherto prudent macroeconomic policy. The governing African National Congress’s (ANC) two partners, the Congress of South African Trade Unions (COSATU) and the South African Communist Party (SACP) were also not informed of the move and criticized it. The general public did not like the move either. In South Africa #ZumaMustFall became the top Twitter hashtag. Four days later, Zuma reversed himself and appointed the highly regarded Pravin Gordham as finance minister, a position he held from 2009 to 2014. The Rand and the stock markets recovered (if not completely).

Opposition to the Nene firing from within the ANC is likely the reason for Zuma’s reversal. If Zuma shows little understanding of how a modern economy works (he has almost no formal education), plenty of ANC leaders not only understand it, but are personally invested in it. As has been the case in the past, the South African political economy has once again self-corrected with the appointment of Gordham, who has successfully steered South Africa through its only recession since the coming of “non-racial” democracy in 1994.

The South African media is now reporting that Zuma and his political allies within the ANC have been politically wounded. The ANC faces local elections in 2016 and an internal fight in 2017 over Zuma’s successor as ANC leader. The opposition parties, especially the center-right Democratic Alliance and the left-wing Economic Freedom Fighters, are visibly strengthening as public disillusionment with Zuma grows: the South African media reports that 66 percent of the public distrusts the president. At this point, the party leadership race appears to be between Nkosazana Dlamini-Zuma, Zuma’s former wife and his candidate of choice, and Cyril Ramaphosa, an architect of the 1994 “non-racial’ democratic settlement and the candidate of business. The South African media is also speculating that the ANC could remove Zuma as party leader soon. As of December 14, #ZumaMustStillFall had replaced, #ZumaMustFall.

Only the ANC can remove its party leader and, in effect, the president. That has happened before; in 2008, the party removed Thabo Mbeki as party leader and forced him to resign the presidency a few months later. As a practical matter, Zuma could be removed by a majority vote of the National Assembly or by a motion of no confidence. The ANC holds 62 percent of the seats in the National Assembly. How ANC members vote would be largely determined by the party’s National Executive Committee (NEC). Zuma has appointed most NEC members to government posts. If Zuma were to fall, many or most of them would lose their jobs and salaries. Hence, at this stage, it is unlikely that the NEC will turn against Zuma. However, this episode has probably weakened the candidacy of Dlamini-Zuma to be his successor as party leader and enhanced the position of Cyril Ramaphosa.

Perhaps the significance of the past five days is that once again South Africa’s political system has demonstrated an ability to self-correct within a democratic political framework and an economy largely conducted according to free-market principles.