Battle for heart and soul of the SA economy

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Connect the dots. A story that all South Africans should be worried about is the intervention of Johan Rupert, known as the don of the Stellenbosch mafia, in the reversal of the appointment of Des Van Rooyen as the minister of finance last year. Sources say on President Jacob Zuma’s announcement, Rupert flew to South Africa from London the next morning and summoned Deputy President Cyril Ramaphosa to a meeting. Accompanied by bankers including Absa’s Maria Ramos and her husband, Trevor Manuel, who is a director of Goldman Sachs, Ramaphosa was told in no uncertain terms that Zuma should reverse his appointment of Van Rooyen.

The story may be apocryphal but subsequent events showed that it was true. Van Rooyen was removed from the post after serving only four days of his appointment and moved to the post of Minister of Corporate Governance and Traditional Affairs. The value of the currency fell by 12% to a record low of just below R18 to the US dollar and the rest, as they say, is history. Fast forward to last month when Zuma unexpectedly welcomed the newly established presidential press corps and addressed the issue of Van Rooyen. Zuma said he was the most qualified finance minister he had ever appointed in that portfolio.

That thing caused such havoc and people think that Zuma just woke up one day and took a decision. Some say he was told by some people (to appoint Van Rooyen),” Zuma was reported as saying. “You might not know why I take decisions. You might get a good reason, but you don’t know, you may speculate based on what you see,” he said. In the backdrop of the debate on state capture, the question to be asked is who exactly it is who runs the economy.

In response to the fall in the rand, the ANC Youth League in January outlined the intricate market trading system existing in the world. It also outlined how financial institutions stood to gain with the fall of the currency and said they were a threat to the growth of developing countries. The league said currency had become a great source of income for financial institutions. “These institutions trade the rand by selling it among themselves which greatly impacts its price. In the name of a free market system, governments have limited control in how the markets buy or sell the currency in their countries.” It quoted Adam Smith’s book, The Wealth of Nations, in which he argues that in the new economic world order, the days of conquering countries through military means was no longer necessary as countries could simply conquer others by selling their products back to them and taking the wealth back to the nations from which they came.

They accused Barclays, with the help of its American counterparts, Goldman Sachs, of “excessively and aggressively selling our currency”. The Guardian earlier reported that 15 authorities around the world were investigating collusion and price manipulation in the largely unregulated currency market. Last year, Forbes reported that four banks had pleaded guilty to antitrust violations relating to collusion and manipulation of prices in the foreign exchange market. The banks involved are Citigroup, JP Morgan Chase, Barclays and the Royal Bank of Scotland. We cannot forget that the depreciation of the rand in 2001, weakening by 42% from September 1 to December 31, led to the Rand Commission.

The commission was prompted by a letter from the head of the SA Chamber of Business, Kevin Wakeford, to former president Thabo Mbeki, alleging that from “reliable sources”, he had come to hear that southern African countries were involved in currency trading. Although the final report on the inquiry found no evidence of illegal conduct, the report remains controversial. Christine Qunta, one of the commissioners, submitted a report independent of the other commissioners.

Once the inquiry was commissioned however, the rand began to appreciate and remained at around R6 to R7 for the next seven years. Much has been made of the Guptas alleged appointment of ministers which if proven true, is of grave concern. They have, for their part, denied any involvement in influencing cabinet appointments.

Calls for Zuma’s relationship with the Guptas to be probed are to be welcomed. However, the probe must be wide ranging to include all those who play a role in shaping the economy. From the meeting with Rupert, it is clear that he and other business leaders have a direct influence on who is in the Cabinet based on their ability to influence markets.

Article by: Pinky Khoabane is a columnist and social commentator

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