Whither or wither South Africa?
By Tim Hughes, Non-executive Director, Warwick Wealth
Former Finance Minister Derek Keys told me in 1994 that the best thing he ever did was to arrange for the then ANC economic policy unit to travel to foreign capitals, particularly of communist countries, to better understand how modern economies are run by Finance Ministries and Reserve Banks. What emerged from the ANC global fact-finding mission was a better understanding of how global markets operate, an appreciation of the vagaries of financial markets and stock exchanges, but most of all, he claimed, they returned with a message from the Chinese government, ‘keep the state sector small, empower business and uplift the poor.’
While these lessons were applied to some degree under the earliest post-apartheid administrations of Nelson Mandela and Thabo Mbeki, they are lost on the current administration. Today, politics has trumped economics and South Africa is the poorer for it. As it always does eventually, (ask Marx, Thatcher, De Klerk or Gordhan) economics will overcome and will force a reversal of the current direction. But first, let’s understand what is unfolding on the political landscape of our beautiful, beguiling and perplexing country.
Like Springbok rugby, politics in South Africa is not for the faint-hearted. It is brutal, cut-throat, uncompromising and its consequences impact directly on the wealth of its people. President Jacob Zuma has raised the stakes in a do-or-die political poker game that called the bluff of those who thought they had trumped his bid to wrestle control of the Treasury. This midnight manoeuvre was part of a grander strategy to loosen the purse strings to increase state expenditure, fund under-performing state-owned enterprises and to launch the proposed nuclear build programme, all in the name of radical economic transformation.
The President’s night of the long knives that saw the ousting of his former close ally and comrade Pravin Gordhan saw Zuma emerge as a political victor, but at the cost of all South Africans. The reason for this is economic in nature. South Africa is fully-integrated into the global economy and consequently, political actions have economic reactions with Newtonian certainty. Just as international factors, or external shocks, such as the sub-prime lending crisis impact our economy directly, conversely, the governance of South Africa’s economy is watched closely by the international financial community, which is compelled to react, in this case negatively.
The President’s actions are those of a desperate man, who has placed personal interests ahead of those of the country. Lamentably, those around him capitulated when subjected to populist pressure. This has been a salutary lesson to ANCs heavy hitters who had assumed a relatively easy passage on their march to Pretoria and the Presidency in 2019. The stark and painful truth for the ANC is that as a party, it is as divided as the country is by Jacob Zuma. It is now a party that is not only rent, but for rent.
Pragmatists within the ANC have more in common in policy terms with the DA, COPE, the IFP, UDM and ACDP. Populists within the party are a very few degrees of separation from the Economic Freedom Fighters. This is not to suggest that the ANC is poised for another fratricidal split. History has shown that splits weaken the splitters. The South African electoral system, based on a proportional representation party lists, militates against coalitions, so an alliance of ANC populists with the EFF is not possible in the current dispensation, nor is a grand alliance of ANC pragmatist and the current Parliamentary opposition.
The only arena to reform the party and thus determine the immediate future of our country is from within the ANC. This does not mean that the rest of the country should disengage from politics, however. On the contrary, two factors will sway the ANC towards the election of a more pragmatic leadership at its national conference in December 2017. The first is popular opposition, more so than Parliamentary opposition.
When blue collar workers, line-up on the streets with businesspeople, teachers, professionals, students and unemployed township dwellers as they did on Friday 7 April, it sends the clearest signal to politicians. The Rainbow Nation, while struggling through storm clouds, is determined to re-emerge and fulfil the promise of Nelson Mandela. The other influential factor is the financial markets, local and international, who care less about political stripe, but will reward good leadership and policy with investment and punish bad in equal measure.
The people and the ratings agencies have spoken, it is time for change.