I have generally avoided the Zuma topic believing that Presidents good or bad, don’t really have a material effect on investing; that all changed in Dec when our President summarily fired the then Finance Minister and replaced him with a relatively unknown bureaucrat with a dubious track record.  The rather obvious ploy was an attempt at gaining control over the Treasury, which as I wrote at the time was akin to giving the fox the keys to the henhouse.

Markets reacted as one would expect by voting with their feet; the Rand bearing the brunt of the sell-off as foreigners headed for the exit door.   The Rand is yet to recover notwithstanding the reappointment of the highly regarded former finance minister, Pravin Gordhan as the new incumbent.

Unfortunately for President Zuma, but fortunately for the rest of South Africa, Zuma got his timing horribly wrong.   What may have passed during the boom times of the commodity super-cycle was met with fierce resistance, owing to the dire economic situation SA Inc. is already facing.   Needless to say Nene’s firing was like pouring fuel on a fire already out of control.  Had Zuma studied ancient history he may not have taken the bold, but foolish decision to rock a boat clearly already in distress.

The ancient history I am referring to dates back to between 2649 -2150 BC and the disintegration of the great pyramid builders, which was possibly brought about by the economic consequences of the Nile no longer flooding.  Professor Miroslav Barta writes “without reasonable floods, there were no reasonable harvest and therefore very bad taxes, without appropriate taxes there were no sufficient means to finance the state apparatus and maintain the ideology and integrity of the state”.  Sound familiar!?

Poor economic prospects expose bad politics and will ultimately be the reason for a regime change.   When the money goes out the door, love flies out the window.

 

Mark Williams
Mcomm, CFP®, HdipTax
T. 021-851 3746
E. service@synfin.co.za

 

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When The Money goes out the Door, Love flies out the Window
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