No stepping up until Zuma stands down

The uncertainty over the position and status of President Jacob Zuma poses a political risk for SA. Deputy President Cyril Ramaphosa’s leadership is being tested by poor communication and coded “constructive and fruitful” talks between the Presidency and Luthuli House. Having two centres of power does not work for the ANC, and Zuma’s continued occupation of the highest office does not sit well with most of society either.

Ramaphosa’s character and ability to lead SA are on trial. For an economy that requires the elimination of political risk and an inclusive, sustainable growth and development strategy to stave off further credit downgrades, political stalemate is a distraction.

Ramaphosa’s ANC presidential honeymoon brought back some optimism to SA and external stakeholders, as witnessed at Davos in January. He passed his first economic test with distinction when he changed the board of Eskom by appointing Jabu Mabuza and Phakamani Hadebe as chairman and acting CE, respectively. While it showed that Ramaphosa is a decisive man, the lack of transparency in the process leading to the action led to speculation whether pressure was put on the government by lenders such as the World Bank.

Ramaphosa’s second test was Monday’s confirmation of SA’s poor fiscal position when the state used off balance sheet methods to fund the illiquid Eskom through the Public Investment Corporation (PIC) and Government Employees Pension Fund (GEPF). The state balance sheet could not take the additional burden given that total government guarantees issued to public institutions‚ independent power producers and public-private partnerships stand at R688.8bn. The largest of these, at R350bn, is to Eskom.

The GEPF, through its asset manager, the PIC, has now provided Eskom with a loan of R5bn to tackle its liquidity constraints. The bridging facility is backed by unutilised state guarantees at Eskom’s disposal, meaning the full faith and credit of the government will stand behind the loan. While many South Africans understand that the collapse of Eskom could result in cross default that would trigger a financial crisis, Ramaphosa and Finance Minister Malusi Gigaba need to place more trust in SA and consult stakeholders.

Gigaba had consistently refused to share the nature of the discussions relating to the bailing out of state-owned enterprises (SOEs) using GEPF money. Given his past role in hollowing out SOEs, leaving them financially fragile, it is not surprising the Public Service Association is smelling a rat.

South Africans understand that to fix the economic woes requires all stakeholders to make sacrifices.

That starts with Zuma resigning from his position. Under his leadership poverty, unemployment and inequality worsened, there is overwhelming evidence of corruption in government and SOEs, and this was laughed off by Zuma all the way to Nkandla.

The longer Zuma stays in power, the more damage will be done to our society as we postpone discussion and debate on the future of the economy.

When the new president presents his state of the nation address, a good start would be an apology on the part of the government for not taking action when Zuma lied on Nkandla, and the reluctance to vote him out in the various votes of no confidence.

This should be followed by an economic road map that includes raising personal income tax, value-added tax and company tax.

In return the state should cut government expenditure in real terms by 6% over the medium term and privatise SOEs to reduce debt, cut the cost of doing business and attract foreign direct investment.

This cannot happen while Zuma is in charge. He must go.