Jacob Zuma. Picture: REUTERS/SIPHIWE SIBEKO
Jacob Zuma should heed former US treasury secretary Larry Summers's warning: 'Markets ... often give valuable warning when conditions change'. Picture: REUTERS/SIPHIWE SIBEKO

THE African National Congress (ANC) celebrated its 104th birthday at the weekend with the usual gala dinner and other public events.

At the dinner and a rally, party and South African president Jacob Zuma delivered reasonably crafted speeches that, although not zeroing in on economic growth as they should have, made some of the right noises about fiscal prudence, partnerships with the private sector, and halting corruption.

He also spoke of the need to deal with low growth and to stabilise public debt, and mentioned structural reforms.

His speeches would not have won the ANC any particular favour with investors, but they would not have done any more damage than the ruling party and the government had already done in the past month with the ignominious firing of former finance minister Nhlanhla Nene.

But then Mr Zuma revealed in post-birthday interviews with eNCA and the SABC what he really thinks when he is not constrained by the prepared text. And it was disturbing.

It was hard to imagine that Mr Zuma could do more damage to investor perceptions, but he may have done just that in the interviews.

He was unrepentant about the damage he caused when he fired Mr Nene, nor did he show any sign of understanding the effects of his actions. Instead, he blamed investors for "overreacting" and "exaggerating" when he put a novice in charge of the public purse.

Markets are funny that way, said Mr Zuma, who assured us that the Treasury would have been just fine under his chosen, but short-lived neophyte — David Desmond van Rooyen — as finance minister even though talk at the time was that much of the Treasury’s senior leadership was prepared to resign on the spot.

But Mr Zuma did not explain why he had reversed his decision a mere four nights later and reappointed Pravin Gordhan to the position.

Funny, the markets may be, but Mr Zuma’s antics crashed the rand, which never recovered and was left particularly vulnerable to the routs in global markets we have seen so far this year.

The rand is really just the share price of SA Inc. It is now exchanged at about R16.50/$ compared to the R14.50/$ before Mr Zuma fired Mr Nene. Hundreds of billions of rand have been wiped off the value of pension funds’ equity and bond holdings.

But Mr Zuma just does not get it, it seems.

He is not the first political leader to be dismissive of market moves, nor will he be the last. But he and his colleagues would do well to heed the words of former US treasury secretary Larry Summers: "Policy makers who dismiss market moves as reflecting mere speculation, often make a serious mistake."

The best executives manage their companies with an eye to long-term profitability, not the daily stock price, says Mr Summers in an article in the Financial Times. But since markets are constantly assessing the future and aggregating the views of a huge number of participants, "they often give valuable warning when conditions change".

Conditions have changed in SA — for the worse.

Mr Zuma can be dismissive about the concerns of many over his ties with the Gupta family, as well as matters of race or the management of the economy. But all of that, along with his apparent failure to understand why markets had a problem with his December moves, will erode SA’s credibility even further. Investors are not giving SA the benefit of the doubt anymore.

That erosion of credibility is bad for the rand and other assets, at a particularly difficult time globally. The effect, on the real economy and on the living standards of most South Africans, will be severe.

As Mr Summers put it in relation to the global economy, "policy makers should hope for the best and plan for the worst".