Treasury economist tells of real impact of Nenegate

A view expressed by controversial ANC heavyweight Nomvula Mokonyane two years ago that if the rand fell, it could be picked up, was made by someone who did not appreciate the impact of the asset price on ordinary citizens, the Commission of Inquiry into State Capture was told yesterday.

In an answer to a question by commission senior counsel Philip Mokoena on her opinion in response to the statement “let the rand fall, we will pick it up”, National Treasury economist Catherine MacLeod said: “It is easy to be glib about these sort of things.

“If it is picked up, government still needs to justify its stability to investors.”

With the country facing a threat of an economic downgrade by Moody’s ratings agency in 2017, at the height of the Jacob Zuma presidency, Mokonyane took flak from several analysts for her statement of “picking up the rand” – a notion she has not been able to substantiate.

In her testimony before the commission, MacLeod said South Africa was still reeling from the impact of Nenegate in December 2015.

Nenegate refers to Zuma’s removal of former finance minister Nhlanhla Nene on December 9, 2015, replaced by little-known ANC backbencher Des van Rooyen – an alleged Gupta lackey who served National Treasury for just one weekend.

The impact of Nenegate saw the rand 10% weaker against the US dollar – having fallen from R14.59 to R15.90. There was an increase in bond yields due to international markets and negative investor perception of South Africa under Zuma, seen as sliding towards embracing state capture – an investment risk.

“Policy uncertainty has real costs and Nenegate was a visible point in the state capture project,” said MacLeod.

“South African citizens and taxpayers became the worst off, due to uncertainty.

“The effects of Nenegate were felt beyond the years that followed.

“Up till today, Treasury has not run a budget surplus since the Nenegate, spending more on debt servicing than providing services”.

The policy-making process, said MacLeod, had to be done transparently to avoid uncertainty.

“Policy uncertainty can be managed if you introduce a social compact endorsed by all key stakeholders – something similar to what President Cyril Ramaphosa has been trying to do.”

Asked by Deputy Chief Justice Raymond Zondo why investors were concerned “if a change in a minister did not mean a change in the president or government”, McLeod replied: “Context around Nene’s dismissal was important, even if someone other than Van Rooyen would have come in.

“If that person who came in was associated with the state capture project, there would have been a similar impact to what we saw anyway.”

Had policy uncertainty not been addressed:

• Stock of debt for 2016-17 would have risen by R33 billion compared with the projections in the 2015 medium-term budget policy statement (MTBPS).
• Debt-service costs for 2016- 17 would have been R5 billion higher.

According to MacLeod, national government debt and debt-service costs for 2016-17 were estimated at R2.156 billion and R143 billion respectively, during the 2015 medium-term budget policy statement.

Today’s focus will be on the embattled power utility Eskom.

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