London - As president Cyril Ramaphosa is set to face his comrades at the 55th National Conference of the ANC from December 16-20 in Gauteng, one wonders whether it will it be the state of the economy or the stain of politics and corruption – the bane of the party over the past decade – that seals the president’s fate?
What sort of mandate will he get from the ANC’s National Executive Committee (NEC), assuming he is reinstated as the party’s president?
Will he suffer the same fate of his predecessor, president Thabo Mbeki, who was ousted by Jacob Zuma and his supporters on the NEC in 2008?
That episode led the nascent democracy to its darkest post-apartheid era of state capture, but Zuma was to be ousted himself in 2018, paving the way for his then deputy, Cyril Ramaphosa.
The ANC can be ruthless when it comes to internal factional fighting. It seems that Ramaphosa may well survive as party leader despite an alleged money laundering scandal surrounding a robbery at his Phala Phala game farm in 2020.
Gains made in structural reforms in 2022’s Q3, despite the country’s dire long-term economic woes, may have convinced Ramaphosa’s supporters on the NEC and party apparatchiks that the government is on the right track towards delivering on its socio-economic transformation mandate, albeit it may take more than a decade to turn around.
The perennial challenge for the governing ANC is matching the rhetoric of aspirations with the actual transformation delivery.
In November, S&P Global affirmed South Africa’s long-term foreign and local currency debt ratings at “BB-” and “BB”, with a positive outlook. This was followed by Fitch’s affirmation of the country’s long-term foreign and local currency debt ratings at “BB-” with a stable outlook. The rationale of both rating agencies is based on the National Treasury’s “higher-than-expected tax revenues” and the “government’s strong efforts to control expenditure which, if continued successfully, could bring about debt stabilisation by helping to reduce the fiscal deficit as a proportion of GDP”.
South Africa’s ratings, added Fitch, are supported by a favourable debt structure with long maturities, mostly denominated in rand as well as a credible monetary policy framework. S&P sees the low external debt position, flexible currency, and deep domestic capital markets as fundamental credit strengths that should cushion against external rising financing risks.
The increased revenues will be used to finance priority infrastructure projects, reduce borrowing needs, promote growth and to build fiscal buffers for future shocks. The problem is the sustainability of tax revenues and current public sector wage demands, which could lead to rising wage inflation and public spending.
The ANC Secretariat’s unequivocal endorsement of Finance Minister Enoch Godongwana’s Medium Term Budget Policy Statement (MTBPS), in October indicates strong support for Team Ramaphosa. “As the governing party,” said the ANC, “our number one economic priority is to accelerate GDP growth and job creation.
Only through a sustained period of growth will South Africa be able to significantly reduce unemployment and improve the lives of our people. The MTBPS comes in most challenging times, in which the economic crisis has shaken everyone individually and collectively.”
Stats SA in November reported a modest 1% decrease in South Africa’s official jobless rate from 33.9% in the Q2 of 2022 to 32.9% in the Q3 of 2022, which includes a similar decrease in youth joblessness, which stands at 45.5% – one of the highest in the world.
These modest green shoots of economic “recovery” are a far cry away from the economic reality of the day-to-day experience of South African businesses, SMEs, consumers and the most vulnerable and marginalised sections of society.
Addressing the 9th Southern Africa/ Europe CEO Dialogue in Brussels in November, Godongwana spelt out the reality in no uncertain terms: “In South Africa, real GDP contracted by 0.7% in (the) Q2 (of) 2022, compared to a downwardly revised expansion of 1.7% in (the) Q1. We expect domestic monetary policy to tighten further in the near term.
Persistently high inflation, rising interest rates, slowing global growth, increased volatility and uncertainty all point to a challenging outlook in the near-to-medium-term for South Africa’s economy.”
Where he reverted to form, was his catchall rationalisation of the government’s “structural reforms to improve competitiveness, industrial policy to boost manufacturing and measures to strengthen the capacity of the state.
We are doing this within a clear macroeconomic framework, including a stable and flexible exchange rate, low and stable inflation, and sustainable fiscal policy.”
The disconnect is that South Africa’s annual inflation rate rose to 7.6% in October 2022 from 7.5% in the previous month, above the 7.4% market expectation and the upper limit of SARB’s target range of 3%-6%.
The playbook is the same for other metrics. South Africa too has seen a sharp decline in fixed investment since the pandemic. Yet, the gross optimism whether in Brussels or at the Lord Mayor’s banquet at the Guildhall in the City of London during Ramaphosa’s November state visit to the UK was almost contagious: “Four years ago, we embarked on an ambitious investment drive to attract some £60 billion in new investment in South Africa over a five-year period. We have already reached £55bn in investment commitments.
The capacity of our SOEs to invest in the economy, to unlock growth and job creation is being enhanced.”
The very SOEs Godongwana bailed out in his Medium Term Budget Policy Statement because of their unsustainable debt.
Pretoria is having some success is in the just transition to clean energy away from coal. An important visitor to Eskom’s Komati power station in Mpumalanga, one of the most air-polluted regions in the world, in November was World Bank President David Malpass, who, two weeks ago, announced a R9bn concessional loan towards South Africa’s just energy transition.
France and Germany signed similar loan agreements of €300m each.
“Reducing greenhouse gas emissions,” stressed Malpass, “is a difficult challenge worldwide and particularly in South Africa given the high carbon intensity of the energy sector.
Decommissioning the Komati plant is a good first step toward low carbon development.
“We are aware of the social challenges of transition, and are partnering with the government, civil society, and unions to create economic opportunities for affected workers and communities.”
For the ANC’s Team Ramaphosa, it is not only a challenge of just energy transition but also of transition of delivering real economic gains to its hapless and overly forgiving citizenry.
Parker is an economist and writer based in London
Cape Times
** The views expressed do not necessarily reflect the views of Independent Media or IOL.