Cyril’s late night move spooks rand
For a moment on Tuesday night it seemed we were back in the Zuma days. Except this time it was President Cyril Ramaphosa making a late-night announcement — that the ANC would support the amendment of the Constitution to allow for land expropriation without compensation.
The rand took an immediate knock, rising from about R13.10 to R13.27, but market reaction overall was relatively subdued, perhaps because there was no new information in the announcement.
By the end of business on Wednesday most of the losses on the currency and in the bond market had recovered to more or less their pre-announcement levels. The rand recovered to R13.18 by the end of the day.
Government bonds appeared largely unaffected, with the 10-year bond trading in the range of 8.6% and 8.73% on Wednesday after a previous close of 8.61% on Tuesday.
Unlike the Economic Freedom Fighters (EFF), ANC national executive committee (NEC) member Ronald Lamola made it clear that the party was not going to nationalise the land but that it must be “redistributed to the people”.
“We are going to give [you] title deeds,” said Lamola. “We are not nationalising the land of this country because, if we do that, it means we are going to dispossess black people who today have land.”
Adrian Saville, the chief executive of Cannon Asset Managers, described market and bond reaction as “fairly sanguine” and that on closer inspection of the announcement one could see that there was nothing new.
“If anything, it is quite reassuring that neither of the bond and equity markets panicked and they have both sort of taken it in their stride,” Saville said.
Tembeka Ngcukaitobi, an advocate and author of The Land Is Ours, said the announcement in the middle of the consultative process “fundamentally undermined the role of Parliament in constitutional amendments”.
He said it was also unclear whether Ramaphosa was speaking as the president of the ANC, which can be seen simply as the ANC’s contribution to the parliamentary process, or whether he was speaking as president of the country.
“The fact is that most South Africans will look at Cyril Ramaphosa as president of the country and they will understand his announcement to be an announcement made on behalf of the government,” he said.
Political analyst Ralph Mathekga warned that the announcement sends a “strange” message to investors at a time when Ramaphosa was trying to attract $100-billion in investments into the economy.
“But if you say to people they must come [and invest] and at the same time you say you are going to amend the Constitution to expropriate land without compensation — the same policy that has caused the greatest anxiety in the investment sector in recent times — you are going to shoot yourself in the foot,” Mathekga said.
But, said Saville, by providing clarity on the ruling party’s position Ramaphosa also gave a sense of certainty to investors “to know what they are dealing with”, particularly on property rights.
“Even if you don’t like the outcome it at least gives us certainty,” he said.
In a six-minute prerecorded announcement, Ramaphosa addressed the nation on the public broadcaster as the president of the ANC after the conclusion of the ruling party’s two-day NEC lekgotla in Tshwane.
Ramaphosa wanted to “clearly and unambiguously articulate the position of the organisation” on the issues of land reform and the present economic condition.
Earlier that day Statistics South Africa announced that unemployment had risen in the second quarter of 2018 by 0.5 of a percentage point to 27.2%. Just last month, Reserve Bank governor Lesetja Kganyago announced a reduction in the bank’s forecast for economic growth from 1.7% to 1.2%. Kganyago said that under current growth levels the country would not be able to make meaningful inroads into tackling unemployment.
Acknowledging that a “proper reading” of section 25 of the Constitution allowed for the expropriation of land without compensation in the public interest, Ramaphosa said the governing party would support an amendment to make this explicitly clear.
“The ANC will, through the parliamentary process, finalise a proposed amendment to the Constitution that outlines more clearly the conditions under which expropriation of land without compensation can be affected,” he said.
But the announcement comes while Parliament’s constitutional review committee has not yet completed its public hearings into whether an amendment of the Constitution for expropriation without compensation is needed. The committee is expected to submit a report on its findings on September 28.
New investments are one of the key elements needed to develop and implement the “stimulus package” that Ramaphosa said would ignite growth and result in job creation, particularly in the light of worrying unemployment statistics.
But Mathekga said the “stimulus package” was just another fancy term used by government to create the impression that it understands policy difficulties. “What is a stimulus package? That’s what we have been doing anyway,” Mathekga said.
Components of the stimulus package include increased support for entrepreneurship and employment opportunities for youth and women, investing in public infrastructure and a focus on localising procurement.
Mathekga said this was an attempt by the ANC to regain control of the public narrative about the land debate and to neutralise the EFF. “The EFF have taken this thing home and they have run with this narrative and policy very well. So I understand that maybe they [ANC] want to assert themselves in the policy dialogue to demonstrate that they are in charge, but they are forgetting that they have been in charge all along.” — Additional reporting by Lynley Donnelly
Tebogo Tshwane is an Adamela Trust business reporter at the Mail & Guardian