The markets are an unforgiving taskmaster. When President Jacob Zuma took to the podium yesterday, in what was billed as “a special briefing on the economy, with a special focus on the mining sector”, he hoped to instil some calm. It never happened.
A mere three hours after his briefing, the rand quickly resumed its descent and fell through R10 against the US dollar for the first time since March 2009.
Reflecting on Zuma’s remarks, one can’t help but get a sense that after four weeks of dithering and denial, his administration has finally woken up to the fact that the reality of the challenge labour strife poses to the economy is something that nobody can just wish away.
Zuma spoke for close to 20 minutes, trying his best to reassure South Africans and the investing community that his government is getting to grips with the challenges at hand. He exhorted everyone to “promote our country and promote activities that enhance economic growth in every possible way”.
But this bit is easier said than done, especially when the reality is that his administration has until now taken an ad hoc approach to dealing with the mining crisis.
Zuma pointed out that Finance Minister Pravin Gordhan “has been using every available opportunity to reassure foreign and domestic investors of our seriousness and commitment to the mining sector and to affirm confidence in South Africa as an investment destination”.
But be that as it may, it is what you do that counts, not what you say.
In the long run, action is what is needed to convince the world that South Africa fully understands the ramifications of inaction.
And to underscore this, one has to ask why the apparent crisis of confidence, which has hammered the rand, has been allowed to fester without the administration taking decisive action or articulating in a clear and simple way how it plans to bring about stability in the mining sector.
This month the rand has lost 11 percent. It means that investors are getting quite antsy.
Personally, I would much rather have had the president stand alongside statistician-general Pali Lehohla on Tuesday – the day on which South Africans got more disconcerting news about the underlying state of the economy.
Growth figures from the first quarter showed that our economic engine is backfiring, rather badly.
Had the president grabbed the microphone much earlier, his message would probably have resonated positively with the markets. If the rand’s reaction is anything to go by, he most likely left it too late to even try to sound convincing about his administration’s efforts to provide reassurance.
Ordinarily, the rand’s decline should provide some solace as our exports become cheaper, but the problem is that our manufacturing base is at or near standstill, meaning there won’t be any spin-off to speak of, even if the currency were to fall further.
And for the mining sector, things just can’t get any worse since the industry not only faces the prospect of more labour turmoil from wage negotiations but is also confronted by a slump in prices.
Whatever justification was given for the president’s briefing, it ought to have been accompanied by a clear objective in mind.
Instead, 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.
“We need faster growth. Without faster growth we cannot succeed in reducing unemployment, poverty and inequality,” Zuma told journalists. Essentially, this was more like stating the obvious. What he did not do is explicitly acknowledge that investors have reason to be concerned.
* Ellis Mnyandu is the editor of Business Report