Economists weigh in on impact of state capture report

Cape Town - If state capture did indeed take place, it will probably cost the South African economy billions of rand directly, Mike Schüssler of Economists Dotcoza told Fin24 on Wednesday ahead of the planned release of the Public Protector's report.

"Local and foreign confidence in the economy would have been higher without such state capture. The rule of law and trust would also have cost us not just rankings, but actual trust in the ability to do fair business in the country. Trust I believe will take the longest to restore," said Schüssler.

"All of this also sets a bad example and we are losing faith in our institutions such as the Presidency and ministerial offices. It has, however, restored the faith of many a business in our courts."

Schüssler said the good work of the Public Protector and the courts are helping people to maintain confidence in a way, but they want to know what happened and if it will happen again.

"People who make decisions say SA may be a place to invest again. Not immediately, but in time," he said.

The report could, therefore, mean some possible good news with the potential bad news.

Economist Christie Viljoen of KPMG told Fin24 that from a rand perspective there have been positive moves against the backdrop of the court proceedings regarding the report in the past week. It showed the continued independence of the legal system.

"The rand [could have] seen a setback if the report is damning and that would create more political uncertainty," said Viljoen.

"From a ratings perspective, rating agencies would be happy with the well-functioning of the judicial system, but they would be unhappy with continued or increased political uncertainty. The net effect of the report would depend on how the ruling party reacts."

For Dennis Dykes, chief economist of Nedbank, said it is not so much about the report, but the fact that it is coming out and the consequences leading from the report.

"I think what the rating agencies are looking for is some sort of resolution that would lead to better policy outcomes and better leadership. They want resolution. They want to see that leadership makes the right decision, for instance for economic growth. They will be delighted if the report says so," said Dykes.

"Under those circumstances the agencies, I think, will give the benefit of the doubt and wait to see what happens."

Dykes added that it would also depend on how credible and verifiable the report is and what sort of action it will lead to.

"It has to be a good thing as it shows the good judicial system and that things cannot be covered up. It must be seen as a positive as far as investment confidence and also for ratings agencies," said Dykes.

"It is important to see how serious the allegations are and then what the consequences will be - what action the ANC will take. I think some people have seen the writing on the wall and are taking a bit of a stand ahead of the wave - and think more and more will jump ship before the ship thinks."