National Treasury economist Catherine MacLeod. Screengrab

Johannesburg - The Zondo commission has heard how the firing of Nhlanhla Nene as finance minister in December 2015 had a devastating impact on the financial markets and on taxpayers. 

National Treasury economist Catherine MacLeod, the chief director of macro-economic policy, was tasked by the commission to figure out the impact of NeneGate on government debt due to the fluctuation in the financial markets. 

Nene was fired on December 9, 2015, and he was replaced by ANC MP backbencher Des van Rooyen. 

McLeod said immediately the next day (December 10), the impact was visible, the rand was weaker against the dollar and there was an increase in bond yields. She said the shift was caused as investors re-priced risks associated with investing in South Africa. 

“The change in ministers increased perceptions of the risk that the South African government’s commitment to fiscal sustainability was weakening,” said McLeod. 

She explained that political uncertainty which comes with removing a minister has real costs for the economy and taxpayers. 

“Political uncertainty has real costs. Nenegate's impact was long-lasting because of subsequent events as well,” she said. 

“We have just given the impact of Nenegate on government borrowing costs. The ultimate incidents of these borrowing costs will depend on the taxation and spending choices of government, but ultimately South African citizens and taxpayers are worse off as a result of these financial market movements which are caused by political uncertainty,” said McLeod.

Commission chair deputy chief justice Raymond Zondo asked if there would have been such a reaction in the markets if Nene was replaced by someone who is known by the markets such as former finance minister Trevor Manuel.

McLeod said it may have been different but an impact would have still been felt. 

“Chair, that is likely, I think it is about the context about why Mr Nene was dismissed as well because there were question marks why he was dismissed given the pressure on the fiscus by various projects,” she said. 

Advocate Phillip Mokoena, for the commission’s legal team, asked if the rand could be picked up after it had fallen, which was a phrase used by Environmental Affairs Minister Nomvula Mokonyane when Pravin Gordhan was removed as minister of finance. 

“Between the time that the asset price is low and you manage to 'pick it up', you have pensioners who are retiring and are cashing in their pension funds and those funds will be of low value. So I would say that’s the statement of someone who neither appreciates the impact of financial asset prices on ordinary citizens and certainly not on government borrowing,” said McLeod.