The EFF’s Floyd Shivambu as finance minister would ‘really spook the markets’

16 Apr 2024

Although it seems highly unlikely that the EFF deputy president will become finance minister, South Africa would take a financial knock if he did.

In typical EFF fashion, politician Julius Malema made the controversial statement recently that the EFF would only consider a coalition with the ANC after the elections if EFF deputy president Floyd Shivambu is appointed finance minister.

In a country where the former president is now standing for election despite numerous charges of corruption and even a reduced jail sentence, little seems impossible any more. Remember, there was once a time when it seemed unthinkable that someone heavily implicated in the arms deal and then accused of rape could become president. But this is South Africa, and stranger things have happened.

DA leader John Steenhuisen did not mince his words at the recent launch of his party’s Western Cape manifesto in Paarl, in the Drakenstein Municipality.

“If you still had any doubt that the doomsday coalition is a clear and present threat to our future, all doubt was removed... when Julius Malema confirmed that the EFF will give its vote to the ANC, subject to one condition: that the ANC make the EFF’s Floyd Shivambu minister of finance,” he said.

Steenhuisen said the “doomsday coalition” that he first warned about in April 2023 from the floor of the DA’s Federal Congress, was now taking shape.

In a somewhat inflammatory address, he went on to allege that, “under the doomsday coalition, with Shivambu as finance minister, the EFF will unleash its destructive economic policies to turn South Africa into the next Venezuela or Zimbabwe. They will expropriate your house and your property. They will nationalise and collapse banks, mines and industry. They will cause the rand to crash, making food, fuel and the cost of living unaffordable, turning South Africa into a wasteland,” Steenhuisen warned.

Read more in Daily Maverick: 2024 elections

Though his words may easily be attributed to the scorn of an opposition political party, Steenhuisen might be on the money, in terms of market reaction at least.

Izak Odendaal, an investment strategist at Old Mutual Wealth, says it is unlikely that Shivambu would take on what is arguably the most important Cabinet position, even in the event of an ANC-EFF coalition.

“Shivambu as finance minister will really spook the markets,” he said, noting that Nenegate was a classic example of what could happen.

Nhlanhla Nene was finance minister from May 2014 until his unceremonious removal from the post on 9 December 2015, when the then president, Jacob Zuma, replaced him with the inadequate Desmond van Rooyen for an entire weekend before the latter was hastily replaced by Pravin Gordhan.

The financial fallout after Nenegate

Reflecting on Nenegate in 2019, Catherine MacLeod, then chief director for macroeconomic policy at National Treasury, said there was a cost in terms of national long-term debt, as the rand tumbled from R14.59 against the US dollar to R15.90 48 hours later on 11 December 2015.

“The change in ministers increased the perception of risk. Investors were also aware of the perceptions of what such changes might mean for the fiscus.”

The Treasury, she said, was trying to caution against unsustainable projects, and the change of minister was seen as an attempt to erode prudent financial management.

Odendaal says that if Shivambu were to take on the role of finance minister, one could expect to see a rand sell-off.

“The question is how much. I think the market has already priced in the possibility of a coalition government post-election. I think it’s safe to say, though, that the initial market reaction to Shivambu or any other EFF representative as finance minister would be very negative,” he says.

The key role of the finance minister, Odendaal points out, is that it should be someone who has political clout and the strength to stand firm and say no when various Cabinet colleagues approach Treasury to fund their projects.

“You can’t have someone relatively junior in that position. The second thing is that anyone new coming into the position of finance minister will hopefully listen to National Treasury officials about the very stark reality that South Africa is at risk of a debt spiral if we don’t take steps to reduce borrowing,” he says.

Shivambu’s take on the matter

Daily Maverick approached Shivambu to give him the right of reply in this article. He seemed particularly put out when Daily Maverick asked him if he thought he was a suitable candidate, in light of his involvement with the collapse of VBS.

Shivambu was found guilty of failing to declare a payment of R180,00o received from his brother, Brian Shivambu, and breaching Parliament’s code of ethical conduct. Nine days of his salary were docked.

A forensic accountant’s report from the South African Reserve Bank found that his brother received more than R16-million from VBS.

Other than referring us to an EFF podcast released on 9 April, he declined to comment.

In the podcast, Shivambu says the EFF will be able to stabilise the electricity supply in South Africa by forming strategic partnerships with capable state-owned companies from China.

The party’s manifesto says it will nationalise the Reserve Bank and create state-owned banks for various sectors. The newly formed state bank will be the conduit for all public sector salaries, invoice payments by the government, revenue from taxpayers and social grant payments.

As per its manifesto, the EFF will “force” the Prudential Authority to offer licences to black-owned insurance companies and will establish a state-owned asset management firm to manage all municipal pensions. DM

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.

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Business Maverick

The financial fallout after Nenegate

Shivambu’s take on the matter