Cyril Ramaphosa’s election as the president of the ANC has given the country some hope of reform. He faces a very difficult task, given those who now make up the party’s ‘Top six’ alongside him, but he was voted in on a mandate of change.
“In the speech he gave in Soweto on the ‘New Deal’, Ramaphosa said that there is an urgency, and a swiftness of movement required to deal with issues around fiscal policy,” says Lesiba Mothata, the chief economist at Alexander Forbes Investments. “I would like to think that he will follow through from that speech.”
Ramaphosa also faces the challenge of managing two centres of power. Jacob Zuma remains the president of the country, and how this situation is managed will be critical to how much Ramaphosa is able to achieve.
“We must understand that he’s just the president of the ANC, not of the country,” says Tinyiko Ngwenya, an economist with the Old Mutual Investment Group. “So he’s driving ANC policy, not the country’s policy at this stage. But what he could do is influence cabinet because the National Executive Committee (NEC) does make up a big chunk of cabinet.”
In particular, there are six areas where Ramaphosa will be expected to demonstrate a clear change from what has gone before.
“Ramaphosa has said that he’s concerned about the erosion of institutions,” says Mothata. “One wonders what he will do with Treasury, because clearly confidence and credibility has waned.”
There has been a lot of concern around the experienced officials who have left Treasury in recent months, and that its work is being undermined. It’s imperative that this is halted. Restoring trust in areas like budgeting and procurement is critical.
There are similar concerns around the South African Revenue Service (Sars), where many people have been highly critical of Tom Moyane’s leadership. Ramaphosa needs to work to restore confidence in the organisation.
“There is already a commission put together by finance minister Malusi Gigaba to have a look at what’s going on at Sars and why there are such big revenue collection shortfalls,” Mothata says. “We want to see how Ramaphosa lends his support to that.”
One of the biggest impediments to growth in South Africa has been policy uncertainty in key industries like mining and manufacturing. Fixed investment has dwindled because things are so unclear.
“Ramaphosa needs to address the policy uncertainty in these sectors that absorb a lot of labour,” Ngwenya argues. “There must be incentives to bring back companies that will hire more people.”
He faces a particular challenge in the mining sector, where the Minister of Mineral Resources, Mosebenzi Zwane, is widely distrusted by both labour and business. Zwane is however very close to the ANC’s new Secretary General, Ace Magashule.
“Ramaphosa is quite close to the mining sector through his businesses, so he does have an understanding that you need to have a good relationship with the mines,” Ngwenya says. “The CEO of the Chamber of Mines, Roger Baxter, has been very vocal in saying that he has no confidence in minister Zwane, so it will be a key question as to whether he will remain as minister or if they will put someone else there in order to ease that relationship.”
Investors will be closely watching how much influence Ramaphosa will be able to wield over the budget that is presented in February next year.
“Minister Gigaba has been speaking about cutting expenditure by R25 billion and finding additional revenue,” says Ngwenya. “If that does happen in the February budget I think we can avert a downgrade by Moody’s.”
There also needs to be action on the country’s growing debt repayments.
“I’m particularly interested in hearing what he will say about the need to manage borrowing costs,” says Mothata. “In his speech about the ‘New Deal’, he said that South Africa ought to stop borrowing and avoid the need to go to the IMF for a bailout. I want to see what he says about that now.”
Complicating this picture is Jacob Zuma’s announcement just before the start of the ANC conference that government would provide free tertiary education. This is now an additional cost that needs to be managed.
Head of the National Prosecuting Authority
Earlier this month the High Court in Pretoria ruled that Ramaphosa must appoint a new National Director of Public Prosecutions to replace Shaun Abrahams. While this is not, strictly speaking, an economic issue, investors are watching what happens very closely as it will have a material impact on business confidence.
“Whichever name he puts forward will give us a sense of the direction he’s going in terms of his stance on corruption,” Ngwenya explains.
Perhaps Ramaphosa’s biggest challenge is how he leads the ANC on the question of recalling the president. It is no secret that investors will feel far more comfortable with someone else at the helm.
“I doesn’t look like he has been given the mandate to recall Jacob Zuma,” says Mothata. “But there may be a brokered deal which could have been brewed under the unity conversation that will lead to a respectful bowing out for Zuma and not a humiliating exit.”
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