Cape Town - This year was a tumultuous one in which politics took centre stage in the economy. Fin24 takes a look at how the most important events unfolded, quarter by quarter.
Zuma meets CEOs
In an attempt to mend relationships with big business, President Jacob Zuma has met with business leaders at various stages during 2016, the first of which took place in February in Cape Town. Among the CEOs present were Barclays Africa CEO Maria Ramos and SA retail tycoon Christo Wiese. Discussion points included ways to improve investment, the decline in metal prices and how economic growth in SA could be kick-started.
Pravin and the NPA – round 1
A few days before Finance Minister Pravin Gordhan was to give his February budget speech, he received a letter from the Hawks, posing questions to the the former South African Revenue Service (Sars) boss in connection with a criminal investigation into the activities of the so-called Sars “rogue unit”.
The move was perceived to be the beginning of a “proxy war” between Zuma and Gordhan as the custodian of state resources.
State capture rears it head
Tegeta Coal: Allegations of state capture started surfacing in the first quarter of 2016, first when the Gupta-owned Tegeta Exploration and Resources was named the preferred bidder for Glencore’s Optimum Mine in a R2.15bn deal. Minister of Mineral Resources, Mosebenzi Zwane, allegedly personally travelled to Switzerland in January to help clinch the deal.
Duduzane Zuma: It further emerged that a company that’s almost half-owned by the president’s son, Duduzane, got shares in Tegeta Coal weeks before it bought Glencore Optimum Mine.
Guptas’ ‘job offer’: Deputy Finance Minister divulged details of how the Gupta family offered him the job of Finance Minister in November 2015, shortly before former Finance Minister Nhlanhla Nene was sacked. He rejected the offer
Denel and VR Laser: Denel in January entered a joint venture agreement with VR Laser Services, in which the Gupta family investment vehicle holds a minority stake. Salim Essa, a business partner of the Guptas, is a director of VR Laser. Denel has acted without the authorisation from National Treasury, which has since tried to block the deal.
Pay back the money, Mr President
At the end of March, the Constitutional Court ruled that Zuma failed to uphold, defend and respect the Constitution as the supreme law of the land and he was ordered to pay back the money that was spent on security upgrades to his Nkandla homestead in KwaZulu-Natal (KZN). Zuma later transferred the amount of R7.814m to the South African Reserve Bank after VBS Mutual Bank – a financial institution with three branches in Limpopo province and one in Johannesburg – granted him a homeloan.
Cabinet to intervene in Guptas and banks saga
In April, Minister in the Presidency Jeff Radebe opened a can of worms when he announced at a media briefing that a an interministerial commission consisting of the ministers of finance, mineral resources and labour had been established to investigate why the banks decided to close the bank accounts of Oakbay Investments, the holding company for the Gupta family's businesses in South Africa. Later it was established that Gordhan in his capacity as finance minister met seperately with the Guptas, but not as part of the interministerial commission.
PIC lost billons post Nene-gate
In May, the Public Investment Corporation (PIC) lost nearly R100bn within 48 hours of President Jacob Zuma firing of former Finance Minister Nhlanhla Nene on 9 December 2015. Daniel Matjila, CEO of the PIC made the admission during a parliamentary briefing with the standing committee on finance. The PIC is one of the largest investment managers in Africa, with about R1.8 trillion in assets. The PIC, which invests funds on behalf of the Government Employees' Pension Fund, among other public sector entities.
SA dodges downgrade bullet: round 1
In the second quarter of 2016, South Africa managed to stave off ratings downgrades from Moody’s, Fitch and Standard & Poor’s. In May, Moody’s affirmed its investment grade rating of South Africa at Baa2, keeping its outlook on negative. In June, Fitch retained South Africa’s BBB- credit rating with a stable outlook, while S&P kept the rating unchanged – also at BBB-, but with a negative outlook.
No violent protests on air, says King Hlaudi
Former SABC chief operating officer Hlaudi Motsoeneng ruled that the state broadcaster won’t broadcasting violent protests. The Independent Communications Authority of South Africa (Icasa) subsequently ruled that the public broadcaster must withdraw its decision not to televise footage of violent protests and destruction of property during news broadcasts, but a resolute Motsoeneng stuck to his guns and refused to retract the decision.
ANC support dwindles in local government elections
In August, South Africans went to the polls to cast their votes in the municipal elections. The DA seized power from the ANC in three metros – Tshwane and Johannesburg in Gauteng and Nelson Mandela Bay in the Eastern Cape. Nationally, the ANC’s support dropped to 53.9% (2011: 62%), while the DA increased its share to 26.9% (23.9%). The EFF garnered 8.2% of votes. Although some ANC members were outspoken, blaming Zuma for the poor results, the ANC NEC stepped in and took collective responsibility for the ruling party’s drop in votes.
Futuregrowth suspends loans to SOEs
South Africa’s biggest private fixed-income money manager Futuregrowth in August announced that it would stop lending money to six of the largest state-owned enterprises (SOEs). Futuregrowth, which has Futuregrowth, with about R170bn in assets, suspended lending to Eskom, Transnet, South African National Roads Agency (Sanral), the Land Bank of South Africa, the Industrial Development Corporation (IDC) and the Development Bank of Southern Africa (DBSA). It later reversed its decision on the DBSA.
Zwane in a solo act
Mineral Resources Minister Mosebenzi Zwane out of the blue issued a statement on behalf of Cabinet, saying there would be a possible investigation into the banks that broke ties with the Gupta family. The President and his counterparts in Cabinet subsequently distanced themselves from Zwane’s statement, claiming that he acted alone. Zwane, however, insisted that he had the Cabinet’s backing when he issued the statement.
New SAA board, but Dudu stays
Despite objections from National Treasury, Dudu Myeni, a former schoolteacher remained at the helm of a newly constituted SAA board. Under Myeni, the national carrier has stumbled from one crisis and controversy to another. But despite the retention of Myeni, the new board consists of people with a solid financial background and include Investec Asset Management economist Nazmeera Moola, Tryphosa Romano, financial head at PPC, and retired chartered accountant Peter Tshisevhe.
Manyi asks Zuma to not sigh FIC bill
Progressive Professionals Forum (PPF), led by former government spokesperson Mzwandile (Jimmy) Manyi, petitioned Zuma to not sign the FIC Amendment Bill into law. The draft legislation will require a senior bank official to approve the accounts of prominent influential persons and oblige banks to to establish the source of funds, as well as monitor these accounts on a regular basis. The PPF, however, claimed the amendment bill had “constitutional defects” as it could violate the human rights of people who are employed by the government or family of state employees, because this makes them a prominent or influential person which immediately renders them a “suspect”.
Pravin and the NPA – round 2
Early in October, two weeks before Gordhan was to deliver his medium-term budget, NPA head Shaun Abrahams announced at a press conference that the Finance Minister would be summoned to appear in court in November on charges of fraud. The rand weakend to as much as 4% against the dollar on the back of the news, while banking stocks lost close to R34bn. Some three weeks later, Abrahams again in public announced that charges against Gordhan would be dropped.
Eskom to be in charge of nuclear plan
The Department of Energy announced it would henceforth be the overarching coordinating body of South Africa’s nuclear build programme, and no longer its procurer. The procurement function moved to Eskom while the Nuclear Energy Corporation of South Africa (Necsa) should be responsible for procuring the fuel cycle and multi-purpose reactor. The power utility will in the near future will issue requests for proposals for the 9.6GW nuclear build programme.
One man standing at SABC Board
And then there was one. Mbulaheni Maguvhe was the last board member at the public broadcaster to step down after his counterparts Krish Naidoo, Vusi Mavuso and later Vuyo Mhlakaza and Aaron Tshidzumba all tendered their resignations. He was called to answer questions at a parliamentary inquest into the SABC board and the public broadcaster’s state of affairs. One of the issues is the board’s backing of former SABC Chief Operating Officer Hlaudi Motsoeneng despite the courts setting aside his appointment. He was subsequently redeployed as group executive of corporate affairs before the courts set aside the latter appointment as well.
State capture – suspicions (almost) confirmed
Former Public Protector Thuli Madonsela’s parting shot was a painful one. Her much anticipated state of capture report highlighted allegations that the Guptas had an undue influence over Zuma, some of his cabinet ministers and even former Eskom CEO Brian Molefe. In her report, Madonsela recommended that
Zuma establish a judicial inquiry to probe allegations of improper conduct. The president has dug in his heels though and are taking Madonsela’s recommendations and findings on judicial review.
It’s not a living wage, but it’s a start
In late November, Deputy President Cyril Ramaphosa announced that a national minimum wage of R3 500 was put forward by a panel deliberating on the matter. The proposed amount is currently the subject of debate at National Economic Development and Labour Council (Nedlac). Ramaphosa said potential job losses as a result of the implementation of a national minimum wage was taken into account and for that reason a phased approach will be followed whereby certain sectors, such as businesses in distress, would be able to apply for exemption under certain circumstances. He stressed that the proposed R3 500 is not a living wage, but it is a “launching pad from where wages can be pulled up”.
SA dodges downgrade bullet: round 2
At year-end, all three major ratings agencies kept South Africa’s sovereign debt rating at investment grade, giving South Africa much-needed reprieve from junk status. Moody’s affirmed its credit rating of South Africa at Baa2 with a negative outlook, Fitch retained its rating, but changed the outlook to negative, while S&P retained the foreign currency rating at BBB-, but lowered the local rating to BBB. Analysts however are of the view that a ratings downgrade in the next few months are just a matter of time. Read Fin24's top stories trending on Twitter: