South Africa's Zuma takes a drubbing for run on rand

Reuters News
Posted: May 31, 2013 8:53 AM
South Africa's Zuma takes a drubbing for run on rand

By Ed Cropley

JOHANNESBURG (Reuters) - The next time South African President Jacob Zuma wants to talk up the economy, he might do better to hold his tongue.

On Friday, a day after convening a "special" news conference to try to stem this month's dramatic slide in the rand and in investor confidence in Africa's biggest economy, Zuma found himself being pilloried for doing the exact opposite.

Within minutes of him concluding his speech with a folksy exhortation to reporters to "just report nicely about South Africa", the rand fell 1.5 percent against the dollar.

The reason most cited by traders was the absence of any sort of coherent proposal to lift flagging growth or tackle the unrest in the mines that has been raging since last August when police shot dead 34 strikers at Lonmin's Marikana platinum mine.

Two hours after Zuma's speech, South Africa's currency extended its earlier losses to nearly 3 percent when another mine reported a wildcat strike, compounding fears of a resurgence of labour militancy in a sector that accounts for half of the country's foreign exchange earnings.

"Zuma Sinks Rand", Johannesburg's Star newspaper screamed in a front page headline on Friday, while the Business Day broadsheet ran a cartoon of Zuma sprawled headlong as he grasps at the tail of a 'rand' springbok disappearing over a cliff.

The currency has lost 13 percent of its value against the dollar this month, and more than 20 percent this year. Of all the world's currencies, only Venezuela's Bolivar and Syria's pound are in worse shape.

The rand was volatile on Friday, with wider-than-expected trade deficit for April spurring some knee-jerk selling.

Editorials on Friday were no less scathing in their criticism of a president whose shaky grasp of economics - his formal schooling ended at primary level - has long been seen as inadequate for the leader of a sophisticated emerging market.

"What became apparent is that, at best, the president seemed rather uncomfortable. At worst, he seemed like he just wanted to get the briefing over and done with," the Business Report said in a front page editorial.

Zuma was on an official visit to Japan on Friday, leaving Gwede Mantashe, Secretary General of the ruling African National Congress, to leap to his defence by blaming a "sulking" private sector for not doing enough to boost growth and create jobs.

"The private sector is sulking. If the private sector is sulking, what can you do?" he told Talk Radio 702.


One caller to the station suggested the only words from Zuma that would calm the rand sell-off would be: "I'm resigning".

However, the prospect of that happening, or the ANC ditching its leader, appears remote even though a faltering economy and tumbling currency can do South Africa's post-apartheid ruling party nothing but harm in an election due early next year.

Since coming to power four years ago, Zuma has been hit by a series of scandals ranging from fathering a love child with the daughter of a friend to uproar over a 206 million rand ($20 million) state-funded upgrade to his private home.

The most recent furore came this month over a business family, the Guptas, with close ties to Zuma landing a private charter flight full of wedding guests at a Pretoria military air base without permission.

However, time and again Zuma, a canny political operator who learnt his trade-craft in the covert world of the anti-apartheid underground, has managed to emerge unscathed in a system where party loyalty trumps individual peformance.

At an internal ANC election six months ago, he was re-appointed by a thumping majority as head of the party that helped bring about the end of white-minority rule and installed Nelson Mandela as South Africa's first black president in 1994.

Yet the 100-year-old movement remains traumatised by the unprecedented ructions in 2007 that led to Zuma's successful internal putsch against his predecessor, Thabo Mbeki, who was then sacked from the Presidency the following year.

"The fairly catastrophic consequences for the ANC of the shafting of Thabo Mbeki would make the party loathe to effect that kind of mid-stream transformation again," political analyst Nic Borain said.

Even though the ANC's share of the vote has been ebbing in the 19 years since the first all-race vote, it won a nearly two-thirds majority in 2009 and the worst-case scenario considered by top ANC officials for next year is a win of only 55 percent.

"Fortunately for the ANC - and perhaps not for the country - the political reality is of single party dominance," said Aubrey Matshiqi, an analyst at the Helen Suzman Foundation, a political think-tank.

($1 = 10.13 South African rand)

(Additional reporting by Jon Herskovitz; Editing by Pascal Fletcher, Ron Askew)