Tough times ahead as ANC policies will slow the economy

With hardly a week to go before the ANC begins its policy conference, it is becoming clearer that the two most difficult years since 1994 lie ahead of us.

The conference will be about two things: President Jacob Zuma’s successor and the meaning and content of radical economic transformation. The succession issue is a familiar one. While the conference is supposed to be about policy, it is also the proxy battleground for choosing a new leader.

Policy positions are proxies for leadership battles. We can expect policies on land and on the Reserve Bank, in particular, to be markers of support for Nkosazana Dlamini-Zuma and Cyril Ramaphosa.

Over the past couple of months, a superficial consensus has developed among ANC leaders on the phrase “radical economic transformation”.

Everyone agrees that it is ANC policy.

There is no doubt that a resolution will emerge stating that it must be accelerated. The debate will be over the component parts.

In the past, ANC resolutions on the economy have been investor-friendly. Even when delegates succeeded in winning radical positions — such as nationalisation of the mines — the ANC leadership scotched this at the last minute, taking out clauses offensive to investors.

That won’t happen this time. Should the Zuma group prevail in numbers, which is widely expected, the resolution on the economy will contain several investor-unfriendly clauses including expropriation without compensation, support for the Mining Charter and possibly something on the nationalisation of the Reserve Bank.

These policy positions will accelerate the downward ratings spiral. With the economy tanking faster than anyone expected, SA could be in for a year or longer of negative growth. Inevitably, the weakening economy will put the ANC under heightened political pressure. As the fiscal picture deteriorates, it will face the choice of deep spending cuts, all-round tax increases (again) or busting the expenditure ceiling.

Chances are that after the ANC elective conference in December, Zuma will step down as ANC president. Dlamini-Zuma, his likely successor, will come in on the radical economic transformation ticket. Pushing ahead with legislation to give effect to radical economic policies in land ownership and mining will cause asset prices to fall, investment to shrink further and those with money to take it out of the country.

It will also cause race relations to deteriorate as the disruption of property rights is invariably associated with the reversal of colonial capitalism.

SHOULD THE ZUMA GROUP PREVAIL, THE RESOLUTION ON THE ECONOMY WILL CONTAIN SEVERAL INVESTOR UNFRIENDLY CLAUSES

A desperate and fraught election campaign will follow. ANC rule will come to an end. Whether in 2019 or later, will depend on several variables: whether the ANC splits after December; whether the opposition can unite in an effective coalition; whether a new party can be born and whether it or the opposition can come up with an offering that is attractive enough to poor people to win power from the ANC.

The problem will be the damage done during the transition. The democratic transfer of power paid great dividends to the already empowered, while the disempowered prior to 1994 have benefited unevenly.

The new political and business elite scored big, while the poor remained stuck in the poverty trap. Key though, was the fact that the 1994 transition freed the economy from constraints and unleashed growth.

This time, the transition will not be a boon for growth and development.