Ramaphosa can’t afford to dawdle on burning Zuma issue
What was predicted for a Cyril Ramaphosa victory in the ANC leadership race has come to pass — that there would be an immediate improvement in sentiment about the country, long dogged by corruption centred on the state president, Jacob Zuma, and whoever was in his inner circle at any given time over the past decade. Even this week’s further revelations around Eskom’s dodgy executives failed to dampen the story of a turnaround in the country’s fortunes. Such improved sentiment is a welcome thing for any incoming leader as it buys him or her time. Just how much time depends on the gravity of the situation faced.
It’s a period rather similar to that faced by Neal Froneman when he formed Sibanye Gold from the unwanted and labour-intensive assets of Gold Fields about five years ago. Shares in his company rocketed on its listing, rising more than 437% to its August 2016 peak. The belief being that here stood an aggressive CEO who was about to embark on a consolidation drive that many had long touted as the only way to ensure that there was some sort of gold industry in the decades to come in South Africa as well as a platinum segment, given the still cancerous high costs that dog the industry. Earnings, in the minds of investors for much of this time, would only follow later. It’s perhaps the same exuberance that follows companies such as private school company Curro Holdings.
Egged on by some cowboy US investors, Froneman has undertaken five transformational deals in the very short life of Sibanye. What he will now be judged on in this, the fifth year of his company’s existence, is just how he beds down its vast operations in both South Africa and the US. It’s a portfolio that will soon include the long-troubled Lonmin by the end of this year. A monumental task, if you ask me.
The ANC’s 14th president doesn’t have nearly the amount of time afforded to Froneman, but certainly as much, if not more, pressure. The deterioration of the economy and the many self-inflicted wounds over at least the past three years has seen confidence levels plummet to depths of 1985, and that’s saying something. The little change in sentiment towards the South African story, that has seen the rand strengthen more than 4% since the day of his election to party leader, buys him some time, if not much.
One, however, shouldn’t omit to mention that the US dollar weakness has had much to do with the strength in the rand. But there is also merit in attributing some of its strength to the political events of December, with the rand the fourth best-performing emerging-market currency of those tracked by Bloomberg since Ramaphosa’s ascension.
The rush for action in cleaning up governance was evident during the very first weekend of his rise to power, when there was already speculation of a Zuma recall. Now with every passing NEC meeting of the ANC, sentiment will be tested by anything that’s read as inaction. For a party set for national polls rather soon, it’s something it can ill-afford. Fixing state-owned enterprises is of ultimate urgency, with Eskom the gravest threat to the country and, for its own selfish reasons, the ANC.
Boards with clear turnaround strategies need to be appointed, governance failures that were caused by meddling chairs such as Dudu Myeni and Ben Ngubane need to be cleaned up.
These failures benefited Zuma, his family and the other first family, the Guptas, so there’s simply no ignoring that elephant in the room. It has to be dealt with.
How long Ramaphosa and his team take to deal with Zuma is their gamble to take. Taking too long or only pushing him out because of outside pressures may prove a hand badly played. Ramaphosa, unlike Froneman, faces swift judgment, and when it comes it may not be kind to either his or his party’s prospects. For Froneman, his judgment has already begun, given that Sibanye’s stock is now about 66% off its peak, compared to an index of the JSE’s top 10 miners that has gained more than 20% in that time.
Sentiment will be tested by anything that’s read as inaction