Sociopolitical Watch – Analysis

Facing a ‘big crisis’, SA at a crossroads

Can Zuma save his legacy and the country?
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For better or for worse, South Africa’s future is for now in the hands of President Jacob Zuma, as the country is facing one of the biggest economic, political and social crisis situations in its history.

Much of this triple-headed crisis that the country is facing right now stems from the global economic ‘big crisis’, resulting from the 2008 financial crisis. Elements of all three were also reflected in the student protest of recent weeks.

It is, however, equally true that much of the crisis can be ascribed to domestic policy and leadership failures on a number of fronts.

At the same time it presents a crisis that should not be wasted and offers the opportunity to get the country onto a whole new development trajectory, economically and socially, and with a healthier political environment, more aligned to the letter and spirit of its democratic constitution. South Africa also has some positives going for it in this changed global economic environment.

For the sake of a balanced view, it is important to note that South Africa is not the only developing country facing serious challenges in the wake of a dramatically changed ‘new normal’ in the global economy.

As Mark Appleton, with regard to the “downdraught taking place across emerging markets at large”, wrote last week: “Economic realities are hitting home in a global environment of uncertainty; and two members of the Brics bloc – Brazil and South Africa – are looking particularly exposed.”

Anatomy of the crisis

The period leading up to the 2008 financial crisis saw a decade with an average annual growth rate of 5%, courtesy of debt-driven consumption in developed countries and manufacturing investment in China, which led to a commodity price boom. It also delivered healthy growth rates in commodity-exporting countries like South Africa.

This bonanza was, however, not sufficiently used by most commodity exporting countries, including South Africa and Brazil to diversify and improve the competitiveness of their economies.

Neither have they been able to develop and/or implement effective policies to counter the global tendency of the boom period to lead to widening inequality gaps creating serious social tensions, to broadening skills bases, new sources of employment opportunities and durable revenue bases.

For example, not only is the collapse of the commodities market in South Africa threatening thousands of existing jobs, but the net profit of Johannesburg Stock Exchange-listed mining companies, according to a PricewaterhouseCoopers report, fell by 75% since 2004. Government’s 18% share via taxes in those profits is due to fall at a similar rate.

And, as the outcome of the recent student protests is now very graphically illustrating, the competition for priority budget allocations has become not only very intense but implies some very tough choices.

First casualties

Broadening South Africa’s manufacturing base, in the face of the need for diversification and employment opportunity creation, is official government policy, but an initiative on that front has become the first casualty of the changed realities.

Last week the Department of Trade and Industry announced that it is temporarily suspending new applications for the Manufacturing Competitiveness Enhancement Programme (MCEP) with immediate effect.

“Over R5 billion was originally set aside for this programme and is now fully committed. MCEP was designed as an incentive to support enterprises in the production sectors of the economy soon after the onset of the global economic recession to weather very adverse market conditions, secure higher levels of investment, raise competitiveness and retain employment,” it said in a statement.

At the same time a vision of the automatisation of mines in the future, set out by Gold Fields CEO Nick Holland last week, is a clear indication that even if and when the commodities markets do bounce back, the sector is unlikely ever to return to the employment figures of the past. Now is the time to proactively plan for this changed reality.

And it is not going to become easier in future. Among other things, the developing drought conditions in the country will bring financial pressures of their own for government – not only to save the agricultural sector, but also to prevent job losses in the industry.

At the same time it is almost inevitable that it will add to pressures on households throughout the country in the form of rising food prices, adding to general feelings of discontent.

It is clear from the reaction, capitulation really, to the student #FeesMustFall and the subsequent scramble to find the funds, not only for a zero fee increase, but also for blanket free tertiary education, that the ANC-government has underestimated the discontent brewing in society. It has also failed to adapt proactively to the changing socio- and economic political environment.

Political adaption

As previously reported, it is expected that next year’s municipal elections will prove that it is no longer a viable option for a single party to be everything to everybody, as the ANC with its ‘governing alliance’ has tried to be since 1994.

If between now and the next general election in 2019, the ANC in desperation to hold onto its ‘broad church’ powerbase fell into a pattern of random knee-jerk reactions – as the #FeesMustFall incident seems to suggest – they might just render the country ungovernable.

What is needed to change the mood in the country, is first of all a change in leadership style and some strong symbolic signals.

A good start might be a signal that President Jacob Zuma will not put fears of increasing signs of tensions between the ANC and the South African Communist Party above the interests of the country as a whole. Firing Dr Blade Nzimande, who has let the country, the government and the alliance down badly as Minister of Higher Education, would go a long way towards fulfilling that requirement.

What would, without a doubt, also go a long way towards improving the mood under the broad public, would be an announcement that, as a savings to help meet the needs of top priorities, the size of the cadre of ministers and deputy ministers is being reduced.

Some positives

Many more risk factors can be identified, from the rise of populist politics, state of state enterprises to trade union militancy. However, there are also some positives counting in South Africa’s favour, including: strong constitutional institutions, a vibrant civil society sector and a local business environment having just been rated as among the best in sub-Saharan Africa in the World Bank’s Doing Business 2016: Measuring Regulatory Quality and Efficiency report.

Also to be welcomed, is President Zuma’s admission last week in an interview with Bloomberg’s that: “You can’t say, when the economy is not growing, that your original plans will be implemented as they were. It is going to be a serious struggle.”

It might just be possible that President Zuma can turn his now dismal-looking legacy around by strong leadership and by soliciting and mobilising the best possible advice.

That is if he is not, early next year, totally wrapped up in the outstanding court cases surrounding the Nkandla affair. Hopefully somewhere in the corridors of Luthuli House some solid contingency planning is being done for such an eventuality.

by Piet Coetzer

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