What Jacob Zuma’s axing of Nhlanhla Nene cost the country

About 148 000 jobs, and just over 1% of the country’s gross domestic product (GDP) may have been lost due to Jacob Zuma’s 2015 decision to sack former finance minister Nhlanhla Nene – and according to an economist, the harm done to the economy may well be with us for years to come.

Treasury director-general Dondo Mogajane yesterday testified at the judicial Commission of Inquiry into State Capture.

He spoke on how they calculated the estimated costs of Nene’s removal, which saw the rand plummet, and which led to an economic crisis from which the country has yet to recover.

Mogajane was the deputy director for public finance at the Treasury at the time of Nene’s axing.

He told the inquiry that “business confidence was at its lowest following Nene’s removal”, and the Johannesburg Stock Exchange (JSE) saw a massive reduction in market capitalisation.

Nene was replaced by Des Van Rooyen, who survived in the post for all of a weekend, until market pressures forced Zuma to replace him with Pravin Gordhan.

Yesterday, Mogajane told inquiry chairperson Deputy Chief Justice Raymond Zondo, that “148 000 jobs were lost in terms of the model we ran. We saw a reduction of about R378 billion in the JSE markets capitalisation. We also costed the impact of at least 1.1% of GDP by the end of that year”.

In reply to a question from evidence leader, Vincent Maleka, on how much business and revenue Gupta-linked companies received from government during the period, Mogajane said Treasury has as yet been unable to determine the exact figures, but was in the process of modelling the applicable revenue streams.

“I have asked our chief procurement office together with our financial management office to model the cost and the revenue that would have been accrued to the Gupta empire … I will certainly make it available to the commission.”

Economist Dawie Roodt yesterday said that while Treasury’s estimations on what the Nenegate saga cost the country may emphasise the exact gravity of the problem, it is practically impossible to place an exact amount on the money lost.

Roodt believes the loss to the JSE market cap may be somewhat overstated, since “it is not as if those stocks disappeared. They are still there”.

“It is only really a loss, of you sell at a loss,” he said. “Otherwise it is similar to what is happening now. The market is currently also down, and if you hold onto them, and the market recovers, you haven’t lost anything”.

The economist says he is also sceptical of the calculated 1,1% GDP loss that Treasury calculated, since “the economy is simply too big to model and calculate this figure precisely.”

He told The Citizen: “I have done these calculations doing different approaches, and including several variables, but the size of the total economy makes it impossible to get an exact estimate.”

What Roodt does believe though, is that the impact of Nenegate is still with us, and is likely to be with us for the foreseeable future.

He does, however, believe that things could recover if properly managed, within a year or two.

– earlc@citizen.co.za

For more news your way, download The Citizen’s app for iOS and Android.