/ 2 November 2017

South Africa is held hostage to the toxic politics of the ANC

What a shame it is that even younger ANC leaders like Gigaba seem unable to imagine a politics beyond Zuma and the stagnation he represents.
What a shame it is that even younger ANC leaders like Gigaba seem unable to imagine a politics beyond Zuma and the stagnation he represents.


If it showed anything, the recent medium-term budget policy statement has proven that South Africa does not have a government capable of dealing honestly and head on with the developmental crisis that the country finds itself in. It will not have such a government for some time, at least not until the 2019 general election when President Jacob Zuma is constitutionally obliged to step down.

As things stand, South Africa faces a series of interlocking crises, none of which are soluble without a solution to the rest. The good news is that all of them can yield to the actions of a government and social partners determined to turn our dire picture around.

Unfortunately, we currently have neither the equipment, nor seemingly the will, to find credible lasting solutions. Among the reasons for this is that we are, for the last ten years and at least a few months longer, held hostage to the toxic internal politics of the ruling party.

It’s the economy, stupid
What the MTBPS showed is that the country is for now stuck in a low growth, low investment, low confidence, high unemployment, and high debt trap. A mouthful it may be, but that is the prefix we need to get used to if we are to have any remotely honest discussion of our economic prospects.

Finance Minister Malusi Gigaba, whose appointment to the portfolio seven months ago was greeted by multiple credit rating downgrades, reluctantly had to follow the lead of the World Bank, the OECD, our own Reserve Bank and others in a depressing downwards revision of economic growth forecasts. South Africa’s gross domestic product will “grow” at 0.7% in 2017, down from the previously projected 1.3% (weren’t those the good old days). 

We will not see growth rates even approaching 2% until the year 2020, another three years from now. That kind of sustained GDP underperformance means we are not even standing still, but rather rapidly going backwards, since we need at least 2% if we are to translate GDP growth into a modest rise in income levels, not to mention absorb new entrants into the job market (and thus stand still at 27% unemployment). If we recall that during the commodity price boom of the early 2000s we recorded a sustained average growth rate of more than 4% without ever shifting our scary unemployment rates, we would need growth rates above 5% (accompanied by structural interventions) even to make a dent.

With the levels of joblessness that high and likely to remain the way for another decade (regardless of what happens with GDP growth), it will remain unpalatable to reduce government expenditure on social security, which leads to the rather dire debt picture Gigaba painted. Public debt as a percentage of the economy will hit 60% by 2025, leading to increased debt service costs that take money away from social and productive spending except through more borrowing, a classic debt trap. Such a vicious cycle can only be broken by higher levels of growth, which can only be achieved by increased investment, both public and private. Which brings us neatly to the crisis of low confidence that keeps us trapped in the cycle.

It’s also the politics, dumbass
The credit ratings agencies did not downgrade South Africa to sub-investment grade because they dislike Gigaba, after his midnight appointment on March 31 this year. Nor did they do it out of opposition to Radical Economic Transformation (whatever that may mean to you). If anything they probably laugh at the silly and confused rhetoric, not to mention the decidedly conservative geriatric who claims to be the champion of its cause. 

They are also no great supporters of his predecessor Pravin Gordhan, although they possibly trusted him to do what is right for the fiscus a bit more than his successor. The downgrades were merely an expression of the distrust and contempt with which Zuma’s government is now held by the people who make the investment decisions that are critical for our economy and its future. 

They simply don’t believe that Zuma makes changes to his cabinet in pursuit of better or more effective governance (does anyone anymore?). The change at the Treasury, they concluded, was calculated to make the place more pliable for the kind of expenditure bonanza that will be profitable to Zuma and his business associates, foreign and domestic. 

The subsequent October cabinet change would have only served to confirm these fears, aimed as it was at accelerating the R1 trillion nuclear build program before Zuma leaves office in 2019 (or is booted out earlier). This lack of trust in Zuma and his government (and so by extention, Gigaba) isn’t exclusive to the ratings agencies, the investor community and others that may be dismissed as defenders of ‘White Monopoly Capital’ (whatever that may mean to you). 

The majority of South Africans share the scepticism. With approval ratings hovering around 18%, Zuma is the least popular and trusted elected leader anywhere in the democratic world. Only Brazil’s Michel Temer polls lower than him, but he hardly qualifies as an “elected leader”. Zuma was elected to serve a second term as president of the republic, but in a democracy the popular will is not static, and what we have discovered about him over the last three years and more mean that the right to make decisions and take actions on our behalf no longer belongs to him.

In places where democracy is healthier and more responsive, either he alone or his government in its entirety would have stepped aside to allow the country’s challenges to be tackled by people with a more solid mandate.

Those people will, at least in the near future, come from the ANC, although the mandate they hope to win grows less solid with every passing day. What a shame it is then, that even younger ANC leaders like Gigaba seem unable to imagine a politics beyond Zuma and the economic and social stagnation he represents.

Vukani Mde is a founder and partner at LEFTHOOK, a Johannesburg-based research and strategy consultancy