South Africa Watch

ANC has South Africa on hold until at least December

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South Africa’s political future and its economic development are on hold. And, it will remain in that position until at least December, but probably well past the 2019 scheduled general elections.

However, even the 2019 elections could at best, be a starting point to get the country back on a more positive trajectory. But, it is not only the politics of the African National Congress and its pending elective congress in nine weeks’ time that is blocking progress.

How fundamental a re-think on the structures of also the economy is needed, is evident from the following fact: Even under the administration of President Thabo Mbeki, when there had been 43 consecutive quarters of economic growth, the unemployment rate kept climbing. It now stands at just short of 28% overall, and at 52% for the youth.

The reasons for this are also not all South African based or exclusive to South Africa as systems and structures in the international so-called global village are under pressure and in a state of transition and turmoil.

However, how South Africa respond to these challenges, remains a domestic affair. On some fronts, especially in the political environment, things are not going well at all. On the other hand, South African civil society, and its organised formations are standing up to the challenges of the day and internationally is setting an example to protecting the interests of citizens and taxpayers. For the business and corporate community, it is a mixed bag of some villains, some heroes and mostly cowards unable to come to grips with the many uncertainties in the air.

Political environment

At the root of South Africa’s uncertain future is the turmoil in the governing ANC, failing to come to grips with its transition from liberation movement to a well-functioning modern political party, keeping its leaders adhering to high moral and ethical standards. The ANC is pulling itself apart as some factions take on an almost gangster type culture in the face of the temptations that come with political power.

On the political front, while the confusing power battle inside the ANC is raging, the country has, at best, gone into a holding pattern.

Top economist Mike Schussler probably got it spot-on when he last week, on how the ANC’s internal war impacts on the economy, said South Africa’s economic growth rate will not see a “major improvement beyond 2%, 2.5% for the foreseeable future”.

“Ultimately next year is a holding year. I’m not saying we are going into a recession, but we are on a growth strike. We are going to struggle to grow fast enough to create enough jobs, which in itself creates a political problem,” he said.

Irrespective of who gets elected in December as the new leader of the ANC, the political scene will not settle down as the hard campaigning for the 2019 election will immediate follow in its wake.

New and additional characters from present opposition parties – and possibly even new political parties – will enter the stage, but the suspense drama will be far from over. The scenery will change, but the final conclusion will be still some way off.

Some of the actors, waiting in the wings, like the Democratic Alliance and possible coalitions, have problems of its own.

Socio-economic impact

And, even if the ANC is replaced as the lead character in 2019, it will leave so much destruction and chaos behind, that it might take up to decade to repair much of the damage to the state, its structures, and to the economy.

By then much of the cowardly available investment capital probably would have left our shores. According to Schussler, 60% of South Africa’s gross domestic product value is already invested in other countries. Most South African companies are now investing outside South Africa – they no longer believe returns in the country are worth the risk.

An indication of the administrative/management and institutional knowledge destruction that the ANC is causing can be seen in the fact that state owned electricity utility company, Eskom, in three years has had three different board chairs and five chief executive officers. It got its third CEO for this year alone last week, and his appointment is only an interim one – following on a previous interim ‘caretaker.’

The scope of the destruction of trust between government and key economic sectors and the business community, also became evident last week when Chamber of Mines executives and office bearers decided to boycott an indaba banquet at which Mineral Resources Minister Mosebenzi Zwane was the guest speaker. This came after the minister, amongst other, unilaterally published a charter for the industry, which they believe would destroy it.

That much of state administration and dealing with problems in the national household has gone on hold, are also illustrated by how many crucial, key court cases, with potentially far reaching implications are pending, from corruption charges against President Jacob Zuma to the issue of the appointment of a commission of enquiry into state capture.

Likewise, the Special Investigative Unit is waiting for approval from Zuma to begin its probe of Eskom, and the appoitment of a new board of the SABC has been on his table for some time now. This is but two excamples of a long list of such matters.

Conclusion

In the final analysis, it all comes back to politics, and mainly to what is happening inside and around the ANC. In its semi-annual Monetary Policy Review (MPR), the South African Reserve Bank (SARB) last week warned that, looking ahead, any economic recovery would be "feeble" and growth would barely exceed 1.5% by 2019, well short of the government's long-term target of 5%.

South Africa's economy is growing much less than it should be and is unlikely to reach 2% annual expansion in the short term because of political and policy uncertainty, SARB said.

"The historical evidence is clear that investment in South Africa is highly responsive to uncertainty," the bank said, noting that private sector investment continued to contract.

Irrespective of what happens in the final days in the run-up to the ANC’s elective conference, or on that day, and irrespective of what happens in the run-up to the  2019 general election or on that day the turnaround for South Africa is far from being just around the corner.

by Piet Coetzer

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