Staying on the growth path
All eyes are on the ANC as its succession battle will ultimately determine whether much-needed economic reforms can be implemented.
the battle for succession in the ANC in 2017 will determine whether the economic reforms needed to boost South Africa’s meagre pace of growth can be fully implemented, enabling the country to hold on to its investment grade credit rating and providing the kind of leadership required to restore business confidence and social stability.
The reformist faction in the party may manage to extend its influence at the expense of “rent-seekers” benefitting from patronage at the ANC’s elective conference in December 2017, after the most politically turbulent year since the end of apartheid left President Jacob Zuma and his cronies weakened, although still with the upper hand.
Deputy President Cyril Ramaphosa, who has the open backing of both the business community and Cosatu, is widely perceived as the best candidate to manage conflicting ideologies in government for a policy path that is in the country’s best interests.
He would have to beat candidates favoured by Zuma, who has presided over an economic decline blamed largely on policy confusion, mounting mismanagement and blatant corruption in government since he took over the leadership of the ANC in 2007.
Zuma survived top-level calls for him to step down at an extended meeting of the party’s National Executive Committee (NEC) in November, but his position was hotly debated, and a decision taken to discuss the state of the party at a policy meeting in mid-2017.
“Political resolution will allow for significant momentum to build in the economy,” said Colin Coleman, Goldman Sachs managing director for sub-Saharan Africa. “We will either manage to get the basics right, or muddle through with the status quo maintained through a patronage type of ruling arrangement which won’t be conducive to deepening reform and will lead to a continuation of stagnant growth.
“Reform and modernisation must take root in leadership – that is critical to a coherent economic path. The battle lines have been drawn for succession in the ANC and the war will be fought in 2017,” he added.
Analysts say the choice of the “top six” leaders of the NEC is probably even more important for the country’s policy direction than the selection of a president. It includes the posts of ANC secretary-general, deputy secretary-general, treasurergeneral and national chairperson. If current treasurer-general, Zweli Mkhize, was selected as a compromise ANC president, it would be taken as a sign that economic reforms were on track given his high-profile interactions with the business community in 2016.
Frans Cronje, CEO of the Institute of Race Relations, believes that there is an opportunity for what he describes as the “modernist” camp in the ANC – black entrepreneurs, the emerging black middle class and a cross-section of older party stalwarts – who understand that policy reform is needed to secure the future of the ANC.
“If the modernist factions of the ruling party can eject the leftists and form a new balance of power with the traditionalists, then a new range of reformist scenarios are open to South Africa,” he wrote in an analysis titled The Rise of the New Right.
Coleman described 2016 as a “victory for democracy” in SA, a view shared by many as some of the country’s most respected institutions – including Treasury – were attacked by powerful public officials. Supported by civil society, business leaders, and the independent media, they fought back in the courts, which made judgments demonstrating their independence.
Another favourable development was finance minister Pravin Gordhan facing down flimsy fraud charges. He rallied government, business and labour unions in a successful bid to convince credit rating agencies that economic reforms – or at least some of them – were on track.
The fact that SA was not downgraded to sub-investment grade in December will make it very difficult for Zuma to dismiss Gordhan, who has blocked every attempt to undermine state institutions and companies since he was appointed in December 2015.
The rating agencies have all said that the country’s broad political institutional stability supports its credit rating, even though political events have hindered important growth-enhancing reforms. These include improving governance at cash-strapped state-owned enterprises and clarifying some of the business regulations seen as deterrents to investment.
Arguably the biggest achievement for policy reform over the past year has been the unprecedented cooperation between business, government and labour in the midst of political infighting. Prolonged strikes in every sector were averted, and a multiyear wage agreement was struck in the platinum industry at levels in line with inflation.
While SA’s labour relations are rated as among the worst in the world by the World Economic Forum, a monthly minimum wage of R3 500 has since been proposed and cautiously welcomed by labour unions, although there has been no agreement as yet on strike balloting, which business wants.
“Reform and modernisation must take root in leadership – that is critical to a coherent economic path.”
Current ANC treasurer-general