Here is what South Africans can expect under a new finance minister
Economist, Cees Bruggemans has offered a glimpse into the future of South Africa, after President Jacob Zuma announced the removal of Finance Minister, Nhlanhla Nene, on Wednesday.
“It just goes to show that apparently anyone can be finance minister,” said Bruggemans, of Bruggemans & Associates, Consulting Economists.
Nene’s replacement is ANC member of parliament, David Van Rooyen.
Van Rooyen is the whip of the standing committee on finance and whip of the economic transformation cluster.
He is a former executive mayor of Merafong Municipality and a former North West provincial chairperson of the South African Local Government Association.
“Swimming naked has suddenly acquired a new meaning as SA got a new finance minister ready to do his master’s bidding – which is to approve trillion rand nuclear deals and other assorted schemes favouring dubious supporters,” Bruggemans said in a brief note on Thursday.
“SA can ready itself for unrestrained tax increases, and state spending projects that will drain its citizens for decades to come as favoured presidential schemes are nodded through.”
The economist said that global markets would not be amused with events, ‘which spells junk status’.
“As global capital rejigs its portfolio weighing, the SA bond market, JSE equity market and SA rand will be the main barometers of such judicious reconfiguring,” Bruggemans said.
“It makes any rand forecasting a standard joke, for the infinity symbol is the only appropriate one to use.”
“The dam wall has given way. Stand back while the world sits in judgement. It will take a while to embody this in new values, for which reason putting any numbers to paper at this early stage is premature.”
The economist said that South Africans should accept that:
- We will pay more for our borrowing henceforth;
- The rand will be a good deal weaker;
- Inflation will bulge higher;
- SARB may act earlier and more than expected on interest rates in 2016 if it has any appetite left after this;
- Taxes will rise, all of it a lot more and earlier than would otherwise have been the case.
“Clearly, events yesterday have overtaken all else. So whatever else I had written, waiting in the pipeline to be published – forget it. We are in a new era,” he said.
“We may call the New Year, in good Chinese tradition which will become the new norm for us, no doubt, the Year of the Zuma Poodle. A more appropriate moniker for the national currency I cannot imagine,” Bruggemans said.
“So, the Poodle is expected to quickly reach for 20:$ and 21:€ in 2016. It should imply a CPI inflation surge closer to 7%.”
What SARB will do to neutralise such surging remains to be seen, Bruggemans said, noting that if Treasury can fall, so can others.
“Your petrol/diesel costs – and imported food for the poor – are about to seriously rise even before the new finance minister gets to you in the New Year. Seriously depressing for real spending, output and income in the economy.
“And for business confidence as all plans get rejigged. Also for labour peace as inflation compensation demands will be upped.
“One can hear the presidential chuckling as these events unfold,” Bruggemans said.
More on South Africa economics
Why Zuma sacked Nene according to the EFF and DA
Zuma removes Nene as finance minister
How Jacob Zuma is allegedly plotting a third term as president
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