Ramaphosa and team are making strides
It is almost a year since the SA economy avoided the total collapse that has defined post-colonial economic development after independence in most other countries.
Following independence, the economy goes through a honeymoon of integration of the indigenous business class, economic boom and a growing middle class, followed by an economic bust that is sustained for a long period until the World Bank and IMF intervene through a structural adjustment programme.
On the eve of the governing ANC’s 54th elective conference in 2017, then president Jacob Zuma announced a fee-free tertiary education programme for parents with a combined annual income of R300,000 or less, without any concern about the affordability of such a programme and the junk status two credit ratings agencies had already imposed on SA. The future of the country was to be determined by about 4,700 ANC delegates. This ultimately resulted in a narrow victory by Cyril Ramaphosa, sparking “Ramaphoria”.
SA returned to positive economic growth in the third quarter of 2018 at a rate of 2.2% as measured by change in GDP. This followed a well-calculated, thoughtful and patient leadership style that is process-based and institutionbased, for which Ramaphosa is becoming known.
Following his appointment in December 2017 as ANC president, his first task was to stabilise Eskom and bring back to the table lenders who had been voting with their feet due to poor governance.
Eskom is still in crisis, but it now has a capable board and executive leadership. Transnet also has a new board and acting CEO Tau Morwe, who have stabilised the entity. Its capability was witnessed by the speed and efficiency with which a damaged bridge in the Sishen-Saldanah iron ore line was repaired. Denel and SAA have major challenges but have been stabilised.
Regiments, McKinsey, Trillian and many other entities that have allegedly benefited from malfeasance by stateowned enterprises, and the lack of speed in recovering the illgotten proceeds of such deals, remain a challenge for Ramaphosa. Perhaps the appointment of Shamila Batohi as national director of public prosecutions could change that, but it remains to be seen. The Zondo inquiry is opening more cans of worms, presenting opportunities for prosecutions.
Following a high court decision this week, the urgent resolution of the SA Revenue Service leadership saga can shift the focus towards tax policy, particularly the increasing tax burden and uncertainty over growth.
What has been achieved by Ramaphosa’s team in under a year is tremendous.
But it is a work in progress — a view that has been echoed by rating agencies such as S&P Global Ratings, which has said that along with the tabling of the 2018 budget in parliament, “government has sought to reduce policy uncertainty and restore investor confidence by finalising the mining charter, ensuring Eskom concluded power purchase agreements with independent power producers, updating the Integrated Resource Plan, revising the Public Procurement Bill and appointing a panel to advise the government on equitable land reform that will increase agricultural output”.
In the UK I have interacted with some of the commodity investors in SA and emerging markets broadly. While they have been paying attention to Brexit, they have also been very negative on emerging markets, including SA. Their main concern is the changing goalposts relating to mining rights and land expropriation without compensation in SA, and the export tax in Zambia.
If SA is to entice these investors to return, it needs a long-term policy horizon without threats of policy changes. But before then the Treasury must demonstrate further concrete implementation of measures aimed at changing the growth trajectory for the better.