SOMEONE stopped me the other day and asked me what political reputation has to do with finances, and why it is so relevant to discuss South African politics on this platform. I told her it has everything to do with the matter.
It is not only private companies that trade on reputation: individuals and countries do so too. In fact, everyone trades on reputation – even NGOs (though not for profit). Issues like governance, corporate or organisational culture, departmental culture and leadership conduct will influence the level of goodwill and trust that others will place in an entity.
All of these factors will determine how others valuate the entity in question for their own strategic decision-making, especially where potential risk-taking is concerned.
Driven by their level of trust and ability/will to take risk, donors will give more or less; investors will invest more or less; potential partners will be openly hold your hand in public for the world to see – or not.
That is why even in the murky world of politics, reputation matters. That is also why KPMG and South Africa’s four big banks – all very conscious of the potential impact on their own reputation, or perceptions of it – chose to take a political gamble and sever all ties with companies belonging to very close friends of a sitting president, right here in post-colonial Africa.
If that in itself is not without precedent, someone should tell me of another occasion in which something similar might have happened.
Some people keep pointing out, perhaps with reason, that it is odd that KPMG and the banks chose to cut ties now with Gupta businesses and not before. Surely, they say, they would have been aware of the potentially toxic political ties all along? Is this not hypocrisy on their part?
Keeping an eye on a malignant cancer
My answer to them is that this is of course possible. They made money on these companies for as long as they could, and it is also possible that they were aware of the stink and might have been keeping an eye on it, like one keeps an eye on a malignant cancer.
They simply waited for the right moment before bailing out, beginning to sense the inevitability of a reputational stink bomb explosion.
So, back in December 2015 a sitting president – he who shall no longer be named – was forced to bring back a man he would have preferred to keep within sight but at bay, into the powerful position of finance minister.
It is now common cause that this move had not been scripted into the said president’s game plan – seemingly known only to him and his dear friends, a certain cunning family from a faraway land.
Over a number of years, this family quietly carved for themselves a place as kingmakers in local politics. They did so while everyone’s eyes were still locked on the ruling party’s Youth League, a structure that had been known for decades as the custodian of this title.
The cunning family, also described by some as the president’s handlers, made their move right under the nose of the country’s ruling party, a once glorious liberation movement, dishing out sweeteners along the way while taking control of the mind space of hitherto respected party leaders at provincial and national levels, and within key party structures.
Everyone has a skeleton in the cupboard
One needs to look deeper into the cupboards of those who still publicly defend the toxic presence of the cunning family in their midst to see what kind of skeletons will fall out; they all have them.
Thanks to the calculated largesse of the cunning family, they live in houses they could previously only have dreamt of; they drive cars their day job salaries do not reach far enough to pay for; and their bank balances and family trusts hide millions in ill-gotten wealth.
They’re stuck in an intricate web of dependency and a world of material make-believe.
So, once caught in the act like a child with his hand still in the cookie jar, the president – thus named because that is the position he occupies despite lacking the requisite qualities – was forced to pull back his hand by a swift slap on the wrist.
The slap was administered by the markets and shocked countrymen and women – but it was too late. Billions of rands were wiped from the country’s bonds and within 48 hours of his faux pas, a whopping R99bn vanished from the retirement savings of the country’s civil servants.
As if that was not enough, the Unemployment Insurance Fund lost R7bn and the Compensation Fund shed R3bn. The body managing the retirement funds of the country’s civil servants is suspected by some as being used as a slush fund by the political elite to finance dodgy deals that would never pass through the first door of scrutiny by more reputation conscious institutions. But that is a discussion for another time.
Arresting a minister at the cost of the economy
Amid all of this, we keep hearing of decisions some would like to take now, like the arrest of a finance minister whose return into current office has brought a semblance of sanity into the country’s affairs.
We also hear that the faceless people in a hurry to take such steps hesitate only because of looming elections and the glare of rating agencies. The latter must first deliver a much-awaited verdict on the country’s credit status before it’s all systems go.
In the meantime, the country has gone from the number one economy in Africa to number three, all in less than four years. Why are these faceless people playing with fire and risking the economic well-being of our country?