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OPINION: Apparently Rudderless Boat Leaves South African Economy in Dire Straits

Persistent policy uncertainty, constant power outages, as well as continuous bailouts to State-Owned Enterprises (SOEs), have been cited by analysts and economists alike as critical challenges inhibiting economic growth in South Africa. Most recently, the IMF revised SA’s economic growth prospects down to 0.8% from an already low base of 1%.

Sabotaging the hull sinks us all

It would seem that despite the best of intentions, President Ramaphosa is unable to push through some of the hard decisions necessary to turn around South Africa’s ailing economy. This is largely to do with the fact that he has yet to consolidate his power base within the ruling party. If anything, vested members within the ANC appear to be doing everything possible to sabotage his efforts – not caring that these measures also erode investor and business confidence.

With the official unemployment rate at an all-time high of 29%, record job losses in quarter 3 of 2019 and GDP growth rate on a downward slide, something must be done to ensure the ruling party recognises that it is time to put aside infighting in pursuit of the greater good. That, after all, is what they were elected for…

Navigating the NGC

The ANC is set to convene its National General Council (NGC) meeting in June this year; the conference serves as a platform to discuss and debate the strategic organisational and political issues affecting the party. Traditionally the conference was a rubber-stamping exercise, reaffirming certain policy decision taken two years earlier at the elective conference. This year, however, could be different, as no clear school of thought emerged out of Nasrec 2017.

The “Radical Economic Transformation” (RET) faction is adamant that resolutions from the Nasrec conference should be implemented without any compromises. While, the “Cleaning of Grand Corruption”(CGC) faction will look to manoeuvre around the more contentious policy resolutions such as land reform and the nationalisation of the Reserve Bank. Political angling ahead of the NGC has already begun. Mostrecently, Finance Minister, Tito Mboweni took to Twitter to question the ruling party’s decision to review the independence and mandate of the of the Reserve Bank. He was swiftly reprimanded by the office of the Secretly General, a known Zuma collaborator.

International waters becoming rougher

The next few months are expected to be all about contestations of ideas and policy discussions. It will be interesting to see if the governing party will heed the calls of the IMF on the continued policy instability and create a conducive investment and operating environment. At the core of a democracy is the incorporation of the ability to debate ideas, however this must be undertaken in a manner that demonstrates a will to ensure reason and the interests of the country above personal agenda or individual wealth creation.

While there are policy fundamentals that are critical to redress past inequalities or secure a more level playing field to close the income gap, they need to be approached without the presence of populist rhetoric. This distracts reasonable observers from the realities and considerations that go into informing carefully considered mechanisms drafted to secure a more inclusive economy. The unfortunate result of hysterical hyperbole is that confidence in the country(internally and abroad) is constantly being eroded.

The IMF and other rating agencies cite the land reform discussions, policy instability and the independence of the Reserve Bank as key issues that the SA government must address if it is to stand any chance of turning things around.

Steering towards safe harbour

While President Cyril Ramaphosa and his allies may have won the leadership of the party, internal factionalism remains the order of the day. The President finds himself in a very challenging position, one in which he is forced to implement the resolutions that were led by the “RET” faction while also trying to instill confidence within the investor community and big business. The fallout is that the country narrative suffers from a lack of consistent messaging and there is little unity in approach towards economic growth and policy consistency.

For the President to put South Africa on a path towards economic growth, he, together with his government, must adopt pragmatism in dealing with deteriorating state-owned enterprises (SOEs) such as Eskom and SAA. These have become more than just a significant financial burden to the economy, they carry severe, negative, reputational impact too. It is time to appoint trusted, competent allies who are loyal to country (rather than their pocketbooks) and committed to getting South Africa back on course. At this point, the President must look past factional politics and focus on getting the job done.

At the end of the recent National Executive Committee (NEC) Lekgotla – a sitting of the ANC’s senior members where key political and economic issues are aired – President Ramaphosa concluded proceedings with conviction and authority. It is hoped that he will maintain this higher ground and solidify his influence in the face of increasingly potent attacks from the opposing faction. The hard reality is that economic turnaround take time, sometimes decade; what took ten years to break down will take at least as long to fix. Ramaphosa needs time to put South Africa to rights, but if he cannot command stronger support from his party, it may well run out before his official term does.

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