/ 15 February 2018

​Ramaphosa faces a tough job ahead

Endgame: Cyril Ramaphosa is said to have been livid at Jacob Zuma’s recalcitrance.
Endgame: Cyril Ramaphosa is said to have been livid at Jacob Zuma’s recalcitrance.

There may be a general expectation from South Africans at large that Deputy President Cyril Ramaphosa will fix the economy, however analysts are divided on what lies ahead should he be elected as South Africa’s fifth President.

“Ramaphosa will inherit the residual structural problems of the South African economy as they are now … and not just the lack of transformation, but also the lack of revenue and ability to meet tax targets,” says political analyst Ebrahim Fakir.

Even though markets are expecting prosperity under a Ramaphosa regime, and they are hoping for a recovery in the economy from the low growth rut, Fakir explains that it might be a while before South Africans see change.

READ MORE: The rand hits R11.81 as zuma remains defiant on stepping down

“The rand obviously has responded very favourably.”

“It had already anticipated quite a bit of the good political news but now its moved very much closer to the R11.60 level and we thought, at the wake of this, it could get around R11.50 but the market being the market it can get beyond that,”chief economist at Nedbank Dennis Dykes told Mail & Guardian.

Fin24 reported that the rand firmed up 2% higher since 2015, trading at R11.70 minutes after former president Jacob Zuma announced his resignation on Wednesday night. This comes at the backdrop of a weakening dollar.

“The nature of the expectations are wholly unrealistic, the expectation that suddenly there is going to be a turnaround in growth and turnaround in unemployment … it can’t happen,” said Fakir.

Fakir said that even if South Africans released investments today, they will only see a yield or a dividend 10 months down the line.

The first tall order Cyril Ramaphosa faces is to deliver the the State of the Nation Address on Friday which will set the political tone for the budget speech due to be tabled on February 22.

“His priority is the budget really, because that is coming up on Wednesday next week and he has a quite a bit of a shortfall that has to be met,” said Dykes.

South Africa currently faces a R50-billion shortfall from tax revenue collections.

“I think what we are going to see, looking at the current fiscal year which goes back last year, is going to be similar to what was put in the medium-term budget policy statement of about 4.3% deficit of GDP,” Dykes added.

With regard to what the South African economy needed to solve its rampant unemployment and low economic growth levels, Dykes explained that the country needs to get urgently into a win-win mode, in other words encourage business to invest and create jobs rather than make it impossible for them to do so.