It is the question on the lips of many South Africans: how much is Jacob Zuma’s crisis-ridden leadership costing them? Measured by the rand, the answer may be as much as $50 billion.
When Zuma, whose seven years in office have been marked by scandal and economic stagnation, withdrew a last-ditch court bid this week to block a watchdog report on alleged influence-peddling, the currency jumped 1 percent against the dollar.
It gained further when the Pretoria High Court ordered the report by the constitutionally mandated Public Protector to be released by close of business – before retreating again when its contents failed to deliver a killer blow to Zuma.
Many South Africans are now asking openly how much the currency might gain if Zuma, 74, finally decides he has had enough and quits before the end of his term in 2019.
The consensus view among economists is anywhere between 10 and 15 percent. For an economy valued at 4.3 trillion rand ($318 billion) in last month’s interim budget, that amounts at the top end to just shy of $50 billion.
“President Zuma’s contribution to the overall political risk assessment of South Africa is significant. He is clearly a drag on both the economic and financial sectors,” said Gary van Staden, a political analyst at NKC African Economics.
“Anywhere between 10 and 15 percent would be a minimum improvement in the currency were it not for President Zuma.”
Since 2009, Zuma has relied on the ANC’s majority in parliament to insulate him against scandals and allegations of abuse of office, including more than $500,000 of improper state spending on security at his private home.
Wednesday’s report creates another headache for Zuma by demanding an independent judicial inquiry into the extent of political influence by wealthy businessmen close to him, but analysts said it did not look likely to trigger his downfall.
Zuma’s office said he was studying the report. His spokesman did not answer phone calls or email requests for comment.
South Africa is a net importer of energy, meaning a weaker currency can feed through quickly via the fuel price into inflation, which now stands at 6.1 percent, just above a 3-6 percent target band.
The central bank has countered these price pressures by raising interest rates 200 basis points since 2014 – despite stagnant economic growth and South Africa’s worryingly high household debt-to-disposable income ratio of 76 percent.
The nation’s 53 million people counted the cost of Zuma’s dabbling in the economy in December, when he fired respected Finance Minister Nhlanhla Nene and replaced him with David van Rooyen, whose previous brush with public office had been as a small-town mayor.
The rand fell 10 percent in two days before senior ANC and business leaders forced Zuma to clean up the mess by firing van Rooyen and re-appointing Pravin Gordhan, Nene’s predecessor and a figure equally well-regarded by foreign investors.
Van Rooyen – now minister for cooperative governance – has been ridiculed by the opposition as a “two-minute noodle” or “weekend special” for the brevity of his tenure as finance minister. Some critics cite his appointment as evidence of Zuma’s incompetence.
The chorus of anti-Zuma disapproval is growing by the week, drawing in big business, major unions and even senior members of the ANC.
This week, the Nelson Mandela Foundation, set up to protect the legacy of South Africa’s first black president, joined in to say it saw the “wheels coming off” with him at the helm.
Peter Attard-Montalto, an emerging market economist at Nomura, said the rand could bounce as much as 10 percent on a Zuma exit, which might also stay the hand of the ratings agencies threatening to cut South Africa to “junk” status next month.
But the boost might prove short-lived, as any interim leader would be unable to the enact the reforms required to kick-start a flat-lining economy, he added.
“It would obviously delay downgrades,” he said. “But if you had an interim president, I wouldn’t expect too much policy change on the meaningful economic stuff.”
Kevin Lings, chief economist at Johannesburg fund manager Stanlib, put rand fair value at 11.5 to the dollar – a 15-percent premium to its current level – and said it could reach that if Zuma left office, the downgrade threat eased and fresh life was breathed into economic policy.
“The combination of the deterioriating political and economic backdrop and the risk of a credit rating downgrade has had quite a big effect on keeping the rand as weak as it is,” Lings said.
“If you were to remove those elements convincingly, we would argue you would get a significant rally, and it’s not impossible that it might go back to fair value.”