Crunch Time

The South African government is deeply divided at a time when it could hurt most

22 February 2016. Finance Minister Pravin Gordhan presents the budget for a new financial year to the South African parliament in Cape Town. Mr. Gordhan’s tenure as finance minister can be described as one with great context, as the minister holds his position only after having been removed by the president, Jacob Zuma, in his last term. Following the move by Mr. Zuma to replace his successor Nhlanhla Nene at the end of 2014, growing pressure on the president saw Gordhan returned to his role.

But that was 2014, virtually eons ago for many South Africans who have since come to terms with the uncertainty of President Zuma’s administrative roster. The more pressing issue for Mr. Gordhan is the drive to turn South Africa’s economy around. The more pressing issues for Mr. Zuma? Avoid being trampled by a crumbling empire.

The end of a Tumultuous Year, the birth of a new one

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Mr. Gordhan has spent most of 2016 advocating for a delay of judgment from most credit rating firms on the state of the economy’s investment profile. Thanks to the work of his treasury department, and the united defense of a credit downgrade by both private and public organizations, most credit rating firms have decided to maintain South Africa’s credit status above junk.

But this circumstance is not sustainable if the government is unable to present a stable environment for investment in the nation, and that has a lot to do with the current state of politics. A heavy loss of three major metros, Tshwane, Nelson Mandela Bay and Johannesburg city in the 2016 local elections has left the ANC is a sensitive position. The unpopularity of president Jacob Zuma and his administration has created an atmosphere of deep anger and animosity amongst South Africans for the ruling party.

This much I believe is clear to the president, who seems to be maneuvering to solidify his power over the party in the coming Elective conference this year. Mr. Zuma and his compatriots have chosen this year to dig deep into political rhetoric, signaling “radical economic transformation” as the new phase of South African economic development. With all recent criticism of the president’s administration, coming from both from outside and within his own party, 2017 seems to be the breaking point for political confrontation in the party.

Growth, Unity, and Brotherhood under the ANC

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This last week saw Deputy Finance Minister Mcebisi Jonas publish an insightful piece on the South African economy in the City Press. In this article, the Deputy Minister goes to lengths to analyze the current state of South Africa’s economy in the context of global trends and market developments. But beyond this, the Deputy Minister speaks to the social contract established at the birth of the new nation that came to define the first twenty years of democracy.

Detailing the agreements made at the end of apartheid to ensure a safe and sustainable start to the new democracy, Mr. Jonas highlights the consequences these compromises had on the South African economy.

“Back home, the 1994 national consensus has reached its limit.

This bargain entailed a political and class compromise which (1) safe-guarded the interests of the existing (white) economic elite, (2) created a new black elite primarily through state employment and rents, (3) put in place a robust system of democratic accountability; (4) provided a more secure and regulated labour market for the organised working class, and (5) established a comprehensive system of fiscal redistribution for the poor (i.e. welfare).”

Deputy Minister Mcebisi Jonas – City Press

This I believe highlights the threshold of political change that South Africa has reached. The arguments made by Mr. Jonas in this article are ones that have become commonplace among South Africa’s politically active. They are imbued with a deep hatred for the state of affairs under Mr. Zuma and for the continued rise of inequality in the face of great wealth in the nation.

Mr. Jonas’ own position in South African politics is one that has in some ways become synonymous with the internal pressure on Zuma. Mr. Jonas became a key public figure (beyond his administrative position) in 2015 with his confession that the politically influential family of the Guptas had offered him the position of Finance Minister in exchange for future business, indicating the potential power the family might possess over the president’s administration. What unraveled from that confession was a wide declaration by many that Mr. Zuma’s administration is being run primarily on the basis of self-enrichment.

Furthermore, this development highlighted the treasury as a key figure in the battle for control of the ANC. Control of the public purse.

A Divided House

 

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This development in internal ANC politics, which has culminated in multiple public clashes over the president (Including an executive conference in 2016 which saw a no-confidence vote brought against the president by Minister of Tourism Derek Hanekom) has typified the case for a deeply divided government.

This was made pertinently clear by the press conference held by SARS (South African Revenue Services) Commissioner Tom Moyane, detailing the hostile relationship he now shares with Finance Minister Pravin Gordhan. The battle between the state’s financial arm and its tax collection service does not bode well for governance efficiencies.

More and more, ANC figures have begun to bicker and publicly contradict each other, with no regard for the public nature of their conflict. Politicians are now becoming increasingly unashamed of showing their disdain for their compatriots, issuing statements each week calling for the head of those who stand in the way of their goals.

And special attention needs to be paid to the word their. Many within the party are not presently fighting for their perception of a better South African government, but rather one they can continue to benefit from.

There is a war raging within the ANC over the direction of the party, and it is centered around South Africa’s economy and its institutions.

Making Reform Trendy

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This is why the term “radical economic transformation” comes into particular focus. The current mood in South Africa is that much like many other nations at this time, the public remains deeply unsatisfied with the status quo established at the end of the last century. This has left a space for a new philosophy to dictate the next decade of South African development.

Judging by the rise of left-leaning politics in the likes of the Economic Freedom Fighters (EFF), it can be assumed that many South Africans are now drifting towards more “radical” political ideologies. Hence,  the president and his allies have gone to lengths to appeal to a younger generation through the co-opting of rhetoric associated with their thirst for change.

Phrases associated with land expropriation, black economic empowerment, and the vilification of a white economic elite accused of pulling strings from abroad have become all too common go-to words for the president’s men this year. But an angered public will not be appeased by the brandishing of new political slogans, this much was shown in the 2016 local elections. No, for the millions of unemployed South Africans, economic change is the penultimate political tool. This is where the tentative economics of Mr. Jonas’ article and  Mr. Zuma’s politicking collide.

In order to see any votes come 2019, the ANC has to create jobs. In order to deliver on jobs, the ANC must deliver on growth. Judging by projections of growth for South Africa stagnating around 1% for the next year, the economy won’t turn around in time for the 2019 election.

So, actual reform needs to take place to improve the performance of South African industries, otherwise, an underperforming economy will do more damage to the ANC than any opposition party could ever dream of.

This begins with the stability of the nation in the year 2017, but it also stretches beyond the political consequences of 2019. The ANC must do more than just recreate the party for another election. It must recreate the party for a new era.

More than just another radical 

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The ANC has chosen to dedicate this year to OR Tambo, president of the party until his death before the end of apartheid. This is a good choice for 2017. Beyond being one of the ANC’s most iconic leaders, Tambo also was upheld as a leader with keen insight into the heart of the party, having led much of the resistance to the apartheid government. Recently a quote by the deceased leader has begun to circulate on social media:

“Let’s tell the truth to ourselves. Even if the truth coincides with what the enemy is saying, let us tell the truth.”

Oliver Reginald Tambo

Not only does this golden rock of wisdom speak to the various internal conflicts we face as creatures of self-serving righteousness, but Tambo has somehow stretched forward in time to speak to the leaders of his own party. What is required of an ANC in 2017 is for it to be candid with its people, and honest to its values.

Investors remain hesitant on the prospect of South Africa’s market performance, but with all that is going on in the world currently we aren’t the only ones who could be considered unstable, and that’s helped a lot. But this trend won’t continue forever and the South African government needs to be prepared to face reality on the other side.

Issues originating from the ownership of land, accessibility of tertiary education, and delivery of services will remain embedded in the make-up of South Africa as long as its ruling party goes no further than adopting new slogans. With a large swathe of young people unemployed the ANC is sitting on a ticking time bomb that will explode in the country’s face if the challenges that young South Africans face are not met with tangible change.

This is why the change of pace adopted by President Zuma this year is so worrying. Eight years into a term is far too long to wait to begin rebranding the party as a radical movement. It is too far in for people to simply forget the president they’ve had during that time. Nor is it likely to translate into economic policy that will actually benefit average South Africans in the long-run. If the ANC truly hopes to turn the country onto a path of high percentage growth, it must be honest and critical of its circumstances.

People will still be willing to vote for the party if in 2017 the ANC can show that it is more than its president. This includes tackling corruption in a transparent and concise manner that indicates to taxpayers that their hard-earned money will no longer be wasted and that those who fail the people will receive more than a talking-to.

As the elective conference draws nearer the party can draw admiration if it can build its candidates into choices that people feel proud of making.  Candidates dogged by the shadowy figure of corruption will just solidify votes for the opposition come 2019.

Finally, this includes giving shareholders bang for their buck. During the budget speech, Mr. Gordhan announced a new list of wide-reaching taxes that add pressure on an already burdened populace. Local ANC branches must now up-the-ante on governance to show a return on investment. This means the party needs to display a frugality in government activities that includes the avoidance of major debt-making projects such as the nuclear deal. Investments into infrastructure must have sound financial sense and indicate that issues pertinent to people are being taken seriously.

All of this must come from within the ANC. Change must be driven from inside, otherwise, the downward path for the party has already been set.

The time for the silent few in the ANC to sit aside and enjoy the fruits of political connection has passed. If there is no attempt made in 2017 to wrestle the government into coherence, measures taken by the treasury to secure the financial strength of the nation will be all for naught.

 

I hope to write more on the details of South African economy in future, but for now, special attention needs to be given to the identification and persecution of an economic elite, expropriation of land, and the state’s welfare system as these will become central points of conflict in coming months 

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