13 February 2018

It’s only a matter of time. In fact, before this article goes to print, Zuma may have already resigned. And we will all rejoice; the symbol of incompetence, mismanagement and corruption is gone. What is there not to like?

Well, I am not so sure.

There are two angles to the effect of Zuma’s departure on the markets and the economy. The first reaction will be on the financial markets. We have already seen a huge appreciation on the exchange rate of the rand and the bond market. Even some equity prices reacted with jubilation as it became clear that the Zuma reign is coming to an end.

It’s like a marathon runner getting a boost, a few k’s before the end of the race — a sugar rush and the anticipation of the end of a gruelling run. But once you cross that line, it’s always an anti-climax. Especially as the sugar boost recedes…

I reckon that a Zuma-resignation, or a vote of no confidence, will be the tail end of the euphoria of the Zuma exit. The rand may gain a few cents more, the bond market may be a few points better, and the JSE may have a relief rally…

Even so, then it’s time to look ahead again. It’s time for the budget and it’s time to face the reality; we are still in deep water!

The budget will be horrible — it’s inevitable. The state-owned enterprises (SOE) are financially and functionally demolished. The other ills are also still with us: unemployment, a dysfunctional education system, the local authorities, South African Social Security Agency (SASSA), Passenger Rail Agency of South Africa (Prasa)…
I am afraid that once the joy of the end of Zuma inevitably recedes, the distressing reality of an abused economy will again loom large.

Beware of the Zuma high, it may not last that long…

By Dawie Roodt, Chief Economist of the Efficient Group, 13 February 2018