Ramaphosa at the crossroads and four futures lie before us
As the ANC enters another leadership chapter, we can reflect that real per capita GDP is better than at any time in the country’s history. The dependence ratio, which is the number of dependants per 100 people, has fallen from 380 in 1994 to the current 251.
There have been some successes — but it could have been much better, for sure. Unlocking some of this enormous potential now falls to the ANC’s latest leader, Cyril Ramaphosa.
His critics ask why he has not made any radical changes to his Cabinet. His advocates respond that he is playing the long game and we should not expect to see any fireworks on appointees or structural reforms until after the 2019 general election. Rather, considering his slim victory margin, his priority will be to enforce unity and stability in the governing party.
When Ramaphosa decides to get going, says South African Institute of Race Relations CEO Frans Cronje, he has some huge obstacles to confront. “Firstly, we have largely run out of money. Secondly, our education system is in dire straits.”
Taxpayers are squeezed and the tiny individual tax base is exhausted. Poor education feeds into unemployment, and the labour market absorption rate, which is way below that of other emerging markets, feeds into living standards. Cronje says the sceptical youth, with 66% unemployment in the 15-24 age group, will be Ramaphosa’s Achilles heel.
“They are not that concerned about corruption or Gupta-type scandals. They want employment so that they can enjoy decent living standards.”
When Ramaphosa does start running the country, Cronje sees four possible outcomes.
One scenario is the authoritarian Rise of the Right, in which pragmatism trumps ideology, somewhat along the lines of an Asian Tiger society. An authoritarian state prioritises investment and its economic growth comes out at an impressive 6%.
A second outcome could be what Cronje calls the Tyranny of the Left. This is typified by populism and eroded rights, including property. There is economic deterioration and destructive racial nationalism, leading to a pariah state. The EFF joins forces with the ANC, recession prevails and the combined ANC-EFF only just holds onto power in 2024.
Third is the Rise of the Rainbow, which delivers growth of about 6%. It has a mandate for structural reform, rule of law is in evidence, there is a rapid uptick in foreign direct investment and trade, recovery is driven by the private sector, and antiwestern hostility dissipates.
The most likely scenario, says Cronje, is The Break-Up. It is a continuation of societal fragmentation, economic underperformance, political instability and contested politics. Economic growth averages a mere 2% a year and unemployment persists at current levels. The ANC has no growth plan and there is no evidence it has the stomach for the reforms needed to get to high growth. By default we are stuck in the mud.
Cronje says a combination of his four scenarios is possible. For example, we could stumble along in the Break-Up mode and with low growth rates, making government expenditure unsustainable. That could result in a bail-out by the IMF or the Chinese. The latter could conceivably metamorphose into a Tiger-type Rise of the Right.
If all of this is making you a bit depressed, think how bad it could have been if Nkosazana Dlamini-Zuma had won. In a instant, Moody’s would have immediately downgraded SA to junk and the rand would have tanked. The resultant chaos could have resulted in a Rise of the Right or, perhaps more likely, a Tyranny of the Left.