Finance Minister Pravin Gordhan. Picture:  REUTERS/SIPHIWE SIBEKO
Finance Minister Pravin Gordhan. Picture: REUTERS/SIPHIWE SIBEKO

SENIOR business leaders have had three key meetings with senior government officials since the firing of Nhlanhla Nene last December. The influence of those was clear in last week’s state of the nation speech.

The first was on the Sunday four days after the shock Nene decision. The second pulled together 60 CEOs to meet with Treasury officials at the end of last month. The third was on Tuesday last week, involving 100 CEOs in the run-up to President Jacob Zuma’s speech.

The message in those meetings has been evolving. The first conveyed the carnage wrought to bank balance sheets by the decision, with the spike in bond yields and the almost certain ratings downgrade then on the cards having put the entire financial system at risk.

That meeting pulled together the bank CEOs and their representatives with Minister in the Presidency Jeff Radebe and African National Congress treasurer Zweli Mkhize.

Since Mr Zuma’s reversal on Mr Nene, the message has evolved to one of averting the ratings downgrade which, while delayed by the reversal, is still very much a risk. While Mr Zuma spoke of a downgrade in terms of an increase in foreign borrowing costs in his speech last week, that is only the small tip of a big iceberg.

A downgrade would lead to a dramatic decline in the value of the rand as international debt markets would be closed to SA. That would trigger inflation, compounding the already stark inflation outlook being driven by high food prices.

Interest rates would follow upwards in an effort to combat inflation — not just a little, but in the order of two or three percentage points.

The result would be a disaster for the poor, who would see the cost of basic goods shoot up while borrowing costs simultaneously increased. Businesses would hunker down with massive lay-offs. True economic calamity would follow.

That message was conveyed clearly in the January meeting with senior Treasury officials. I suspect the business leaders were talking to the converted. The Treasury with its team of economic analysts is well aware of how the dominos would fall in the event of a downgrade.

It has been at the coalface of government’s fortnightly bond auctions, no doubt looking on with horror as bond yields have shot up.

The benchmark R186 was trading at 9.2% on Friday, having recovered from the shock spike to 10.4% immediately after the Nene decision, but still significantly above the 8.6% it was trading at before that.

Last month’s meeting at Nedbank’s head office resolved to set three working groups the job of putting flesh onto a plan to avert the downgrade.

One, led by Old Mutual emerging markets CEO Ralph Mupita and Nedbank CEO Mike Brown, focused directly on the downgrade risk. Another led by Bidvest CEO Brian Joffe and Discovery CEO Adrian Gore focused on how to avoid job losses. The third, led by Standard Bank CEO Sim Tshabalala and Public Investment Corporation CEO Dan Matjila, focused on stimulating economic growth.

Their work then fed into the final meeting held last week with Mr Zuma. That meeting flowed from SA’s efforts to sell the country at the World Economic Forum in Davos and was booked into diaries some time ago as a post-Davos debriefing.

But it became much more than that — an opportunity to lobby the top level of government directly.

The meeting included Mr Zuma, Finance Minister Pravin Gordhan, Trade and Industry Minister Rob Davies and Economic Development Minister Ebrahim Patel.

The effects were clear in Mr Zuma’s speech.

It promised much that business has been asking for: promoting SA as an investment destination; delivering on long-promised infrastructure investment, including addressing the poor governance of the state-owned enterprises; easing up visa restrictions on bringing in scarce skills; and finalising long-delayed amendments to mining legislation.

A surprising theme was the recognition that our one growing competitive advantage is in financial services, and promises were made to promote this as a strength.

It is easy to roll one’s eyes and say we’ve heard it all before. But never before have the suggestions of business so rapidly and clearly fed into the president’s policy position.

While Mr Zuma may be weaker politically than ever, he seems to have realised that the only shot at redemption is if he avoids the ratings downgrade and deals with our dreadful economic outlook. That means taking business seriously.

It might work. If it does, we may come to see December 2015 as the inflection point in SA’s fortunes, as the point when political momentum shifted in favour not just of sensible talk, but of delivery. I can only hope.