Zuma’s survival keeps South Africa on the edge

In early December, just a day after receiving the welcome news that South Africa would be spared a downgrade to junk status by S&P Global Ratings, President Jacob Zuma’s office dispatched a triumphant statement to the international press corps. Congratulating “Team South Africa” on the reprieve, Zuma argued that the collective exertions of government, business and labour had helped the country overcome a “very volatile global economic climate.”

After a nightmare year featuring repeated corruption scandals, a legal battle waged against finance minister Pravin Gordhan, and an economy permanently teetering on the brink of recession, few members of that “team” are in the mood for a round of backslapping with a president whom they blame for the country’s dire situation.

Yet whether they like it or not, the end of 2016 found Zuma clinging on to power. Having avoided the downgrade and survived a November motion of no confidence from the ANC’s National Executive Committee (NEC), the fate of “Team South Africa” – or what’s left of it – remains inextricably bound to the unpopular president.

“Zuma is weaker but not weak. He still has substantial raw political power as seen by his win in the National Executive Committee … future attempts [to remove him] seem unlikely now unless the sands markedly shift,” says Peter Attard Montalto, analyst at Nomura.

That heated meeting – held in the confines of an upmarket hotel and conference centre on the outskirts of Pretoria in late November, witnessed perhaps the most audacious bid yet by anti-Zuma figures within the ANC to unseat their president. During three days of ill-tempered debate, the rebels – reported to include ministers Aaron Motsoaledi‚ Derek Hanekom and Thulas Nxesi – broke ranks to openly demand the leader’s recall.

For the president, a veteran tactician and survivor of the factional battles that have long plagued the ANC, the outcome of the meeting was rarely in doubt. Having deftly marshalled support and played off emerging factions during an unending year of scandal and economic turmoil, Zuma was always likely to have the numbers to see off a leadership bid in the NEC.

Who will succeed Zuma?

Yet while his victory represents a bolstering of his mandate in the run-up to the leadership conference in December 2017, where he hopes to anoint his chosen successor ahead of his 2019 compulsory retirement, analysts believe that the rebels’ bid could be the beginning of a long-awaited realignment of opposition forces.

“I don’t think they were expecting victory. I think the game plan was to test the waters and make sure they put their discontent on the record, but also to shift the balance of forces within the ANC,” says Ralph Mathekga, an independent political analyst. “The bigger message is to demonstrate that Zuma is not hegemonic.”

For the rebels, the wait for a candidate capable of taking the fight to Zuma has been long and frustrating. Cyril Ramaphosa, the popular deputy president, mining entrepreneur and veteran of the anti-apartheid struggle, has long been touted as a leader-in-waiting, but had previously kept his cards close to his chest.

In November, Ramaphosa was endorsed by the Congress of South Africa Trade Unions (COSATU) – the ANC-aligned organisation he previously led – before announcing his availability to stand weeks later.

“Ramaphosa has been giving speeches that could be interpreted as he’s running as a successor, and he has been endorsed by COSATU. So people are coming to the forefront and it’s starting to be more of a race in the public’s eyes.

At the moment no one has a clear idea of how the factions align,” says Co-Pierre Georg, senior lecturer at the African Institute of Financial Markets and Risk Management at the University of Cape Town. Yet until Ramaphosa or other contenders take up the challenge, Zuma’s stranglehold on the ANC appears robust.

For businesses struggling amid third quarter economic growth of just 0.2%, a weak rand and a widening current account deficit, that is far from encouraging news. Q4 data has provided little reason for optimism, with manufacturing output contracting by 2.7% year-on-year.

While S&P cheered business with its decision not to downgrade the country’s sovereign debt to junk – a move that could have prompted capital flight – a new raft of ratings decisions loom ominously in the new year. Agencies have made clear that renewed political instability, particularly threatening the independence of the Treasury, will force another reassessment.  

“The ratings agencies now are not concerned very much with clarity on economic policy. What they are concerned about has become a question of the basics of governance and coherence within the cabinet,” says Mathekga.

While Zuma’s NEC victory could calm instability in the short term, the economic outlook remains hostage to the president’s erratic relations with finance minister Pravin Gordhan.

Gordhan’s position remains highly precarious given an ongoing legal probe into an alleged “spy unit” during his time leading the South African Revenue Service, which he dismisses as politically motivated. Analysts are split on whether Gordhan, a leading voice for economic reform, will survive the new year or go the way of his two sacked predecessors.

“Pravin Gordhan’s exit and his removal are less likely now. In particular those around Zuma are cautious against this and see it as an unnecessarily risky step,” says Nomura’s Attard Montalto. Yet Mathekga believes that the markets may accept an end to the unworkable relationship if it leads to a measure of economic stability.

“If the head of the cabinet doesn’t respect his [Gordhan’s] mandate, you really do have a problem, and I don’t how this can be solved without a cabinet reshuffle. I’ve got a feeling that maybe the markets can work better with a minister with a little less credibility than Gordhan but who can have a good relationship with the president.”

No reform in sight

While Gordhan’s fate remains unclear, the chances of the comprehensive economic reforms that South Africa requires to boost growth and job creation remain remote, as does his bid to force change on underperforming state-owned enterprises. And with a raft of populist policies, from expanded social security to land reform, expected to emerge from June’s ANC policy conference as factions jockey for power, the chances of a market-friendly solution to South Africa’s economic woes recede ever further into the distance.

“Wider government outside the Treasury just don’t buy the need for reforms,” says Attard Montalto. “This plus the political noise means anything ‘real’ to meaningfully boost per capita growth above zero is very unlikely.”

David Thomas