Compared with 2017, President Cyril Ramaphosa’s margin of victory is bigger and the ANC’s top seven leadership structure slanted more in his favour. There is hope that this could give him more sway to expedite the pro-growth but half-baked policies that have been hamstrung by dissent from within his own cabinet.
Finance minister and ANC national executive committee member Enoch Godongwana has been pushing this line. He told the FM at the conference to expect policy continuity as Ramaphosa would be able to “continue with the reforms he has been championing with a stronger mandate”.
A competing view is that given the extent to which Ramaphosa is compromised by the Phala Phala scandal, policy contestation could actually increase in certain areas if he is beholden to those opposed to aspects of his reform agenda. This includes the coal lobby, with re-elected ANC national chair Gwede Mantashe firmly ensconced as its figurehead.
Old Mutual Wealth investment strategist Izak Odendaal thinks it “unlikely” that Ramaphosa’s consensus-building style will change much but, given his stronger mandate, perhaps the circle from which consensus needs to be drawn will be smaller and more focused.
He expects continuity in terms of economic policy reforms, ongoing fiscal consolidation and a continued gradual strengthening of governance institutions.
“All of this is positive for investors, but we shouldn’t underestimate that it all takes time,” he says. “And it is unlikely to be a smooth ride as there will still be different interest groups that will push their agenda.”
Intellidex director Peter Attard Montalto doesn’t believe the pace of reform will accelerate, given that the real blockages have always been at government rather than party level, but he does expect the new leadership to at least be able to “keep the reform show on the road”, even if the process remains “noisy”.
He is keeping his medium-run growth forecasts broadly the same, but feels the market is too pessimistic about the potential for economic reform to lift South Africa’s growth rate over time.
The real hard work still lies ahead if the new ANC team is to fix what is broken in South Africa, especially in dealing with the Eskom crisis
— Raymond Parsons
Prof Raymond Parsons of the North-West University Business School is hopeful that Ramaphosa will emerge from the conference more resolute, but is also not willing to upgrade his medium-term growth forecast at this stage.
“Drift has for years been the great enemy of delivery in South Africa,” he says. “Positive changes must now be made to be perceived as certain and irreversible. Urgency, boldness and momentum are needed to overcome the previous perceptions of indecisiveness.”
The first clue as to whether there has been a shift in approach to implementation will be if Ramaphosa revamps his cabinet, prunes the deadwood and cracks the whip early next year. A good test will be whether a new Eskom CEO is appointed within three months as promised. Also key will be whether the state achieves a closer partnership with the private sector in delivering key services.
“In short, the real hard work still lies ahead if the new ANC team is to fix what is broken in South Africa, especially in dealing with the Eskom crisis,” says Parsons.
A worrying development from the conference is the push to move Eskom from the department of public enterprises to the department of mineral resources & energy.
While it makes sense for state-owned enterprises (SOEs) to report to their line departments to ensure policy alignment, the problem, says Odendaal, is that “the line departments don’t have the capacity to deal with these large, complex companies — they barely have the capacity to perform their current functions”.
There is widespread suspicion that ANC members want Eskom to report to Mantashe’s department because it is more likely to protect coal interests in the ongoing energy transition.
“This could end up prolonging rather than ending load-shedding, since renewables offer by far the quickest and easiest way to additional electricity supply,” warns Odendaal.
It also runs counter to public enterprises minister Pravin Gordhan’s plan to consolidate SOEs under a single holding company more open to private sector partnerships.
All of this is positive for investors, but we shouldn’t underestimate that it all takes time. And it is unlikely to be a smooth ride as there will still be different interest groups that will push their agenda
— Izak Odendaal
“Legislation is ready... the memorandum of incorporation is ready, we need to take the next step and we will register a company,” Gordhan told the FM at the conference.
However, the more immediate issue is how the government plans to absorb some of Eskom’s debt and finalise its unbundling, which is likely to proceed irrespective of which department takes over.
Capital Economics emerging-markets economist Virág Fórizs fears that to keep intra-ANC dissent at bay, Ramaphosa may have to tone down his reform agenda, including in the energy sector. If so, respite from load-shedding could be pushed out. She also fears Ramaphosa will seek to shore up voter support in 2024 by loosening fiscal policy, delaying debt stabilisation.
She argues that “with persistent power cuts, economic reform plans at risk and a more unfavourable debt trajectory, both South Africa’s near-term economic struggles and longer-term challenges have deepened”.
The consensus is less bearish. Most economists feel that while there is nothing new or certain from the conference that suggests South Africa’s medium-term growth rate will exceed 2%, if reform can be accelerated it will raise potential growth in time. And, importantly, the key downside scenarios have been avoided.
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