Clean­ing up SA’s po­lit­i­cal mess

As long as the poor peo­ple liv­ing in the ru­ral parts of the coun­try are de­pen­dent on so­cial grants for their sur­vival, they will con­tinue to sup­port the rul­ing party.

Finweek English Edition - - THE WEEK - Mariam Isa editorial@fin­week.co.za Mariam Isa is a free­lance jour­nal­ist who came to SA in 2000 as chief fi­nan­cial cor­re­spon­dent for Reuters news agency af­ter work­ing in the Mid­dle East, the UK and Swe­den, cov­er­ing top­ics rang­ing from war to oil, as well a

the key to wrest­ing con­trol of the econ­omy away from Pres­i­dent Ja­cob Zuma and avert­ing a spi­ral of crip­pling credit rat­ing down­grades lies in win­ning over ru­ral vot­ers who are the main sup­port base of the ANC, a panel of high-pro­file an­a­lysts con­cluded last week. But that would be dif­fi­cult as this group of peo­ple – who are gen­er­ally poor and un­em­ployed – re­lies for their sur­vival on so­cial grants dished out by the govern­ment every year, the four par­tic­i­pants warned at an event hosted by the Gor­don In­sti­tute of Busi­ness Sci­ence on 19 April.

Chan­nelling pri­vate in­vest­ment into im­pov­er­ished ru­ral ar­eas was the only way in which al­liances could be built with the coun­try’s poor ma­jor­ity, loos­en­ing the ANC’s grip on power, al­le­vi­at­ing un­em­ploy­ment, and en­sur­ing busi­ness sus­tain­abil­ity, they said.

“What is miss­ing in our society to­day is – how do we wrest this mas­sive un­der­class from the con­trol of vot­ing for the ANC? You can’t do that with­out the cap­i­tal­ists in­vest­ing and cre­at­ing em­ploy­ment for this group,” said po­lit­i­cal economist Moeletsi Mbeki.

“They are so in­cred­i­bly locked into state de­pen­dency. You need in­vest­ment, you need pri­vate sec­tor in­vest­ment to break that de­pen­dency and that is where the busi­ness com­mu­nity comes in.”

Mbeki main­tained that the big­gest hur­dle that South Africa faces now was lack of in­vest­ment, which ac­cord­ing to fig­ures from the Re­serve Bank con­tracted sharply last year.

He said that the main rea­son for re­luc­tance by the pri­vate sec­tor to in­vest was the lack of se­cu­rity of own­er­ship – the main com­po­nent of the po­lit­i­cal un­cer­tainty that ratch­eted up af­ter Zuma’s shock Cab­i­net reshuf­fle late on 30 March.

In a move de­scribed by the other pan­el­lists as the “Night of the Long Knives”, Zuma axed fi­nance min­is­ter Pravin Gord­han and eight other Cab­i­net mem­bers, lead­ing to South Africa’s credit rat­ing be­ing quickly down­graded to junk for the first time in 17 years.

The term was used to re­fer to Adolf Hitler’s vi­o­lent purge of po­lit­i­cal op­po­nents in 1934 and the abrupt dis­missal of seven cab­i­net min­is­ters by Bri­tish Prime Min­is­ter Harold Macmil­lan in 1962.

Iraj Abe­dian, CEO of Pan-African Ad­vi­sory Ser­vices, said that stunned in­vestors were re­assess­ing their strate­gies and that R8bn to R9bn worth of planned in­vest­ment had been put on hold.

Colin Cole­man, Gold­man Sachs manag­ing di­rec­tor for South Africa, said that the re­ac­tion in do­mes­tic fi­nan­cial mar­kets had been muted so far be­cause at this point in time emerg­ing mar­kets gen­er­ally were more at­trac­tive to global in­vestors Po­lit­i­cal economist than de­vel­oped mar­kets.

But South Africa had done it­self no favours and all of that would change if there were fur­ther credit rat­ing down­grades, which would also nudge the coun­try’s rat­ing for lo­cal cur­rency debt into junk ter­ri­tory, lead­ing to a mas­sive sell-off in govern­ment bonds, he said.

Prior to the reshuf­fle, un­prece­dented col­lab­o­ra­tion be­tween govern­ment, busi­ness and labour had made enough progress to­wards the struc­tural re­forms needed to foster eco­nomic growth to keep South Africa’s in­vest­ment grade sta­tus, he said.

“That is all now in ques­tion – bro­ken by one night of mad­ness,” he said. The pa­tron­age net­work within the ANC and the con­sti­tu­tional, mod­ernising fac­tion were now con­test­ing each other for the fu­ture of the coun­try and it was not yet clear which would win, he said.

“We are go­ing to find in the next year that we know where we land. I think it’s too close to call – it’s very evenly bal­anced and I think in­ter­na­tional in­vestors know this,” he added.

Bank­ing As­so­ci­a­tion manag­ing di­rec­tor Cas Coova­dia said the tragedy was that prior to the Cab­i­net reshuf­fle busi­ness was ac­tu­ally be­gin­ning to un­der­stand the im­per­a­tive for struc­tural change to make the econ­omy more in­clu­sive. “All of that is gone – to re­build it is go­ing to be a her­culean task,” he stated.

Mbeki said that SA needed a new type of po­lit­i­cal party as the main op­po­si­tion – the DA and the EFF – were “mid­dle class” and mid­dle­class con­sumers, who were too com­fort­able to start a revo­lu­tion.

He also be­lieves that, con­trary to some opin­ion, the ANC was un­likely to split – the frac­ture had al­ready hap­pened with the col­lapse of its al­liance with Cosatu, he said.

Deputy pres­i­dent Cyril Ramaphosa was among the “crony cap­i­tal­ists” cre­ated by BEE, who had zero con­stituency in the ANC and in the black pop­u­la­tion. “They are not go­ing to split – they are go­ing to en­joy their money,” he added.

Stan­dard Bank chief economist Goolam Bal­lim warned in a ra­dio in­ter­view on 20 April that if what he de­scribed as the pol­icy cy­cle in the coun­try “locks”, eco­nomic growth could fall short of 1% for the next four to five years.

Moeletsi Mbeki

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.