Economists have estimated how much the South African rand would improve if Jacob Zuma stepped down as president of the country.
Consensus among them in a report by Reuters, is an almost immediate improvement of 10% to 15% – representing a R670 billion boost to the economy.
A day before Zuma took his Oath of Office on 9 April 2009, the rand traded at R8.45 against the greenback. A euro was worth R11.33; and a single UK pound was R12.71.
On Friday, the rand traded at R13.48, R14.98, and R16.77 against the three respective currencies, having recovered from R17.99 to dollar in January.
Zuma has jumped from one scandal to the next during his time as president, and has taken the country’s economy down with him each time.
South Africans have gotten poorer under Zuma, and still face the prospect of a sovereign ratings downgrade to junk status by the international rating agencies before the end of the year.
While the ANC and the presidency itself has denied that the economy is tied to the actions of one man – just looking at how markets react at every turn, provides evidence to the contrary.
Most recently, high profile charges against finance minister Pravin Gordhan – seen as a political plot, orchestrated by those allied to Zuma – were dropped, leading to the strengthening of the rand.
Soon after, a damning report into allegations of state capture was released by the Public Protector of South Africa, which again lead to a strengthening of the markets. The report implicates Zuma as a central figure to state capture along with the Gupta family.
According to market researcher and analyst at Nomura, Peter Attard Montalto, any movement closer to Zuma being removed from office – or any event that makes that a more likely outcome – is seen as a positive by the market and investors.
Consensus among economists – including Attard Montalto; Kevin Lings, chief economist at Johannesburg fund manager Stanlib; and Gary van Staden, a political analyst at NKC African Economics – is that, upon a Zuma-exit, the rand would strengthen by at least 10%, up to 15%.
With South Africa’s economic value at around R4.7 trillion ($318 billion), this would represent an immediate $50 billion (R670 billion) improvement in the economy – and would put the rand at around R11.50 to the dollar.
While the economists agree that Zuma carries a high risk profile for South Africa, they noted that his removal from office would only be one step in a much bigger journey to getting the rand back to ‘fair value’.