A new era for South Africa?

President Cyril Ramaphosa’s moves toward economic reform have aroused optimism in the business community, but he faces strong challenges from both inside and outside the ANC.


For much of his first month at the helm of Africa’s second-largest economy, friend and foe alike warned President Cyril Ramaphosa to proceed with the caution of a blindfolded man in a minefield.

With an inherited cabinet and senior party posts held by loyalists to predecessor Jacob Zuma, Ramaphosa was urged to conciliate his opponents in the African National Congress (ANC), avoid direct confrontation and tread carefully on his economic reform agenda. Recalcitrant allies of the former president were said to lie in wait, eager to pounce on any sign of weakness.

There are signs that the cautious Ramaphosa may now be testing the limits of that compromise. In late February, the president launched a cabinet reshuffle, thrilling investors by dumping Zuma-era appointees and parachuting respected reformists Nhlanhla Nene and Pravin Gordhan into key economic roles. In March, the president moved decisively to suspend Tom Moyane, a Zuma ally and head of the South African Revenue Service, bluntly accusing him of compromising public finances.

While Ramaphosa’s early attempts to assert authority and pursue a reformist economic agenda appear to be underway, huge challenges clog the president’s in-tray. He must deliver on his promise to kickstart an economy that grew at just 1.3% last year – well below the 5% needed to tackle unemployment – while overhauling the country’s decrepit state-owned enterprises.

He must attempt to root out political corruption at the highest levels of the state while preserving a fragile détente with surviving members of the Zuma regime. And with national elections looming in 2019, the ANC must move quickly to deliver on its promises of service delivery for millions of poor citizens. If that wasn’t enough, he must do all of this while deftly managing factional competition in the ANC between reformers and those hoping to pursue radical economic redistribution as the explosive issue of land expropriation returns to the fore.

For now, observers are eagerly waiting to see whether the president’s bold moves presage a radical, reformist presidency or the thwarted promise of what might have been.

“We’ve seen some nice improvements in confidence in South Africa and the indices are moving in the right direction,” says economist Dawie Roodt. “While I still think there’s a bit of a honeymoon period left where he can do a couple of things, he’s very quickly running out of that window of opportunity. Pretty soon we will start asking, what have you done? Sometimes you need a political leader to be a bit ruthless and I haven’t seen much ruthlessness from the president yet.”

Economic optimism

After Jacob Zuma’s sacking of credible finance ministers, promotion of radical policies and public battles with credit ratings agencies, the inauguration of Ramaphosa, a multi-millionaire known for his pro-business leanings, delighted investors and led to immediate changes in rhetoric and reality.   

“The rhetoric from the incumbent is that South Africa will make significant moves to try and attract foreign investment… the National Treasury and related departments were handed over to individuals perceived by local and international investors as being competent in their portfolios, and many didn’t have this cloud hanging over them regarding involvement in so-called state capture,” says Signal Risk director Ryan Cummings.

In the first quarter, business confidence rose to its highest level in three years, which Ramaphosa looked to bolster with Nhlanhla Nene’s return as minister of finance and Pravin Gordhan’s installation as minister of public enterprises. Early attempts to fix the country’s troubled network of state-owned enterprises have won plaudits, including the introduction of a new board at Eskom. But reforming precarious state finances against a backdrop of increasing demands on the National Treasury is likely to be a challenge of an entirely different magnitude.    

“Trying to avert a downgrade is going to be seriously difficult. That’s a question of managing fiscal accounts to really prove you are going to cut back on the fat and make sure that finances are well run and you’re not going to tolerate corruption, ”says Roodt.

Through his promotion of reformers and pro-business speeches, Ramaphosa has given early hints that he will seek to address such concerns. His appointment of Gwede Mantashe as mining minister suggests he is keen to rebuild relations after predecessor Mosebenzi Zwane’s botched introduction of the Mining Charter sparked industry fury. Yet his precarious leadership victory, and the continuing power of radical factions within the ANC, means that he will have to walk a tightrope between the interests of business and his party.

“They need to understand that he’s going to have to implement some of these populist policies,” says analyst Ralph Mathekga. “He’s not going to please corporates entirely, neither will he please the population entirely. [But] the markets won’t keep him as president, it’s only the ANC he needs to worry about and appease so they don’t kick him out.”

The limits of compromise

Few issues are likely to challenge investor optimism – or Ramaphosa’s crucial powers of compromise – so much as the looming issue of the expropriation of white-owned farmland. Over two decades after the end of apartheid, the majority of South Africa’s productive agricultural land remains in the hands of whites.

On 27 February, the ANC voted in favour of a motion by the Economic Freedom Fighters (EFF) seeking to change the constitution to allow the expropriation of land without compensation, a move that surprised those who had expected Ramaphosa to accelerate reform on a willing seller-willing buyer basis. While Ramaphosa has repeatedly insisted that any action will be constitutional – rubbishing predictions of a Zimbabwe-style land grab – the fact that it is being mulled ahead of the 2019 elections, where the radical EFF will look to capitalise, is a sign of the myriad pressures he faces.

“There’s a perception by the Ramaphosa administration that the issue of land reform needs to be addressed in South Africa, as the cornerstone of how apartheid specifically discriminated against black South Africans. The ANC’s continuation as an executive party and the dominant political organisation within South Africa will be contingent on introducing mechanisms of economic redress with land being the crux of it,” says Cummings.

While Ramaphosa’s own opinions on the matter remain obscure, the launching of a committee to look into the feasibility of expropriation suggests he will be unable to halt a more radical land reform agenda, even if the business community would like him to. “I’d go as far as to say that if he blocked those policies he would be out, his power base is so precarious that I don’t think he can survive if he comes across as someone who is there to strategically frustrate ANC policy resolutions.” says Mathekga. “He’s inherited a party that’s moved in a radical direction and the best he can to is to manage the process of implementation to lessen the shock… he can’t roll it back.”

While Ramaphosa’s management of land reform will offer significant clues as to his strength within the ANC and his ability to emerge victorious in febrile party debates, the way he deals with those implicated in “state capture” could prove equally telling.

In mid-March, it was announced that national prosecutors would pursue corruption charges against Jacob Zuma, threatening Ramaphosa’s previous attempts to secure a dignified exit for his predecessor and smooth over differences with pro-Zuma colleagues. Although the public and even some ANC members would like to see a public reckoning for those implicated in corruption, Ramaphosa must avoid destroying fragile party unity. The move by prosecutors represents a dangerous moment for Ramaphosa, but it may offer further evidence that power is ultimately draining away from the Zuma camp.

“The political winds have changed, it’s not that Ramaphosa is phoning [prosecutors] up and getting them to do their jobs, it’s just that people do their jobs because they think it’s a way to fall in favour with the current leadership… The problem is that it’s dangerous territory because those whose political life is at risk will need to find a way to fight and may reignite the recalcitrant attitude. Ramaphosa needs to be careful not to be seen as the one driving these institutions,” says Mathekga.

As Ramaphosa considers the implications of the 2019 elections, the reaction of the investment community and the response of ANC allies and enemies, he will have to draw on his diverse experiences as political leader, union representative and millionaire investor in order to work towards the compromises that South Africans can live with. On the economy, state capture and land reform, it will be neither a quick nor easy process to placate diverse constituencies.

“It won’t be an event but it will be a process where Ramaphosa will assert his authority over the ANC and we will see the faction opposed to him become more diluted as time goes on,” argues Cummings. As someone who has so successfully balanced those experiences in his rise to the top, he will be mindful that both compromise and forceful action have their place. And as in March, he will occasionally have to step off the fence to avoid pleasing nobody.

“The ANC have two things that are not doable simultaneously,” says Mathekga. “The first is to demonstrate that they want to grow the economy and assure the international financial community, but on the other hand they need to win the hearts of South Africans shifting towards the EFF. The two objectives to me are mutually exclusive. That’s why you are going to see schizophrenia in dealing with this.”

David Thomas

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