Collective effort pays off in spite of Zuma

THE news that ratings agencies Fitch Ratings and Moody’s Investors Service have not downgraded South Africa to junk status would come as great relief to most. Despite what President Jacob Zuma said in the National Assembly on Wednesday about being downgraded to junk status not being a big deal, the economically literate understand the severe consequences of such a rating, especially for the poorest South Africans.

The president’s remarks, once again, underscore the point that he is clearly unsuitable to lead, especially in this period when South Africa needs the kind of leadership that would pull the country out of its economic rut, which has been characterised by low growth and high unemployment.

It is, however, thanks to the remarkable work of men and women in the government, business and labour that, in spite of Zuma, South Africa was able to convince the ratings agencies that we can turn our fortunes in future.

Led by the National Treasury — particularly political head Finance Minister Pravin Gordhan — the government, business and labour worked closely to present the best case to investors.

Since the axing of Nhlanhla Nene in December last year, which plunged the economy into an unnecessary crisis, we have seen unprecedented co-operation between the executive, the corporate sector and trade unions.

It is the kind of co-operation that should be encouraged further as South Africa seeks viable solutions to its twin crises of high unemployment and rising inequality.

But, as Fitch Ratings correctly pointed out in its report on Friday, politics remains the greatest threat to economic stability.

The ratings agency, which revised its outlook on South Africa from stable to negative, warned of political risks “to standards of governance and policymaking” and said these were likely to persist at least until the ANC’s national elective conference in December next year.

The agency’s observation is obvious to any keen observer of South African politics.

Key state institutions — in a repeat of what happened ahead of the 2007 ANC conference where Zuma stood against Thabo Mbeki — have been sucked into a vortex of factional fighting in the ANC as various party groupings campaign for their favourite candidate to replace Zuma.

Again, Fitch correctly predicts that the infighting is likely to distract policymakers as the various factions will be sending conflicting messages about where the country is heading.

Zuma’s dismissive attitude towards the ratings agencies, as well as persistent rumours that he is planning a cabinet reshuffle before the end of the year, indicate that his faction is so determined to win the next conference it no longer cares if any of its strategies will scare off investors.

This is why the threats of prosecution against Gordhan persist.

He is seen as a stumbling block to Zuma associates’ attempts to capture state-owned enterprises and the Treasury.

It is not too late for the ANC to fix this and get South Africa back on the right path.

Leadership contestation is normal and we should expect the run-up to next December to be robust. The contest should not involve the abuse of state resources and populist messages that may win the vote but result in capital flight.

It should be a battle of ideas. This would be enriching and would restore confidence among investors that the country is on track.