South Africa’s Economy is to Slow Down due to Zuma’s Questionable Integrity

South Africa is on the brink of an economic catastrophe something must be done ASAP to arrest the decline in the country’s fortunes. Standard & Poor has downgraded South Africa’s sovereign rating to negative outlook and the rating might be downgraded further to junk in the near term. In December 2015, President Jacob Zuma was forced to appoint Pravin Gordhan as the finance minister after investor confidence fell to its lowest point in decades.

South Africa has not always been troubled – the country has recorded more than 3% GDP growth in its post-apartheid years, it has a decent middle class, and there was an explosion of high-growth firms in finance, tech, and retail. In fact, investors had taken a liking South Africa as an emerging economic hub and the country earned a place among the BRICS.

However, some of the actions and inactions of Zuma has slowed down the economic growth of the country. The systemic corruption with which Zuma and his cronies after infected the country has eaten too deep into the fiber of its economy. This article seeks to provide insight into how Zuma’s endorsement of corruption is killing the South African economy.

Corrupt leadership breeds corrupt followership 
Corruption has become systemic in South Africa and the pervasiveness of corrupt practices is influencing the public opinion about what is right or wrong. In all fairness, Zuma has never been convicted of corrupt practices and the corruption charges leveled against him in 2009 were eventually dropped. However, you’d be hard pressed to find a rational man on South African streets who doesn’t think that Jacob Zuma endorses corrupt practices in the country.

To start with, earlier this year, the Constitutional Court ordered President Zuma to pay R7.8 million in taxes on his Nkandla home. The Democratic Alliance observes that by its own calculation, Zuma owes about R63.9M in taxes for the fringe benefits he obtained from the upgrades.  DA leader, Mmusi Maimane observes that “It is our strong opinion, based on a thorough analysis of the law and supporting documentation that Zuma’s tax liability as a result of taxable fringe benefits accrued to him through the Nkandla upgrades amounts to R 63.9 million.”

The Nkandal tax case is just one of the hundreds of issues in which Zuma’s integrity has been questionable. About two months ago, revelations emerged about how the South African ministry of police plans to spend R1.93billion on VIP protection. South Africa has 75 Cabinet members; hence, the police department seeks to spend about R25.7M on VIP protection for each cabinet minister.

The most disconcerting part of the whole fiasco is that the South African police department spent R9M between 2013 and 2016 buying luxury cars for president Zuma’s wives. The report also revealed that the government spent more than R100M to buy luxury vehicles for the members of Zuma’s cabinet in 2014. This excessive spending comes at a time when public opinion is angst over the government’s unnecessary spending.

A corrupt government hastens the collapse of a weak economy 
The pervasiveness of corruption has weakened the ANC – the elections are near and the ANC is tacitly avoiding much of an association with Zuma. Weakness in the ANC and the increase vocal criticism from opposition parties increased the level of political uncertainty in the country. The increase in political uncertainties has forced the International Monetary Fund (IMF) to reduce its confidence on the prospects of South Africa’s economic future.

The IMF is now concerned about South Africa and the IMF has downgraded the country’s growth outlook to 0.1% last Thursday. The IMF 0.1% growth outlook is significantly lower than the 0.9% forecast the South African government had previously released. Laura Papi, IMF mission chief for South Africa observes that “We’re seeing many firms having reduced profitability, not just in the mining sector, but in several other sectors…  And we’ve seen a lot of retrenchments unfortunately, so unemployment is actually rising.”

The level of unemployment in South Africa stands at 35% if you include those who have given up hopes of finding a job. Unemployment has become a ban on the development of South Africa’s economy. The increase in unemployment is a direct function of businesses closing shop and the inability to attract investors into the country. The worst part is that an unemployed citizenry is an unproductive citizenry. People who are without works cannot contribute anything to the GDP.

 More so, the government debt has almost doubled since Zuma took office in 2009 – and government debt is already more than 50% of GDP for the first time in almost 20 years. Hence, Zuma is unwittingly killing the country economy by endorsing corrupt practices.

Written by Anyoption

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