ZUMA AND THE LAW OF UNINTENDED CONSEQUENCES

A headline recently appeared on the front page of The Times (29/1/16):"We've been Zuma-Ed". The headline was an introduction to apportioning blame to Zuma for firing Nene, causing a currency meltdown, and a hike in the repurchase rate by 50 basis points. According to the article, economists agreed "that president's sacking of Nene was worth 25 of 50 basis points". There will be many who will unhesitatingly agree with the 25 basis point scenario. But fairness dictates further examination: Although Zuma's firing of Nene was arguably a factor (minimalist at best) in the rate hike, quantifying the factor is simply sensationalist speculation. Any self-respecting economist will concur that the overriding reasons for the rate hike include, but are not limited to, falling commodity prices, China's economic slowdown, rating downgrades, decline in direct foreign investment, capital flight and a worsening drought. In hindsight Zuma's sacking of Nene was, in one respect, a blessing in disguise. A rate hike was inevitable - all Zuma did was to accelerate it. In doing so, the rand has strengthened and capital markets have reacted positively. Who knows where the country would be today if the rate hike was later rather than sooner? Zuma's role in accelerating the rate hike is one singular instance of doing the right thing for the wrong reasons. The law of unintended consequences undoubtedly functions in strange ways!