It is ironic that despite repeated reassurances from President Cyril Ramaphosa that any land expropriation would not – in his words – undermine future investment in the economy, it is the very economy now that has already been undermined.
The clumsy and confusing way the land debate has been handled has not only weakened the currency, but clearly presents an obstacle to investor certainty – a critical element required to attract foreign direct investment.
The ANC's inability to articulate a more nuanced and responsible view has caused a downturn in the domestic property market, is making domestic investors again sit on their cash stockpiles, and certainly will create unnecessary consternation among a raft of foreign investors.
The problem for Ramaphosa is that his inability to control and lead the land debate is now playing itself out in the unrelenting raft of daily negative economic indicators.
The polarised rhetoric on land, combined with the EFF's race-baiting on the issue, is heard well beyond the Limpopo.
And for all the misinformed content of the recent Donald Trump tweet on the issue, the debate has now become internationalised.
Ramaphosa is fast realising that he has, in large part, lost control of the debate. And his heavy-handed approach in clawing back leadership by way of a late-night television appearance simply added fuel to the spreading fire.
Further opinion pieces in global publications like the Financial Times have largely failed to clarify issues sufficiently.
Expropriation as a tool is a red flag to many. With numerous global examples of economic and social meltdown within the context of draconian state intervention (viz. Zimbabwe and Venezuela), South Africa has walked into policy quicksand of its own making.
South Africa requires confidence-building policies rather than wave-after-wave of unease and uncertainty.
This is the time to grasp the mettle and provide innovative policies to enhance industrialisation, improve ease-of-doing-business, embrace public-private partnerships and promote technological change through innovation and education.
The land challenge is threefold. Ramaphosa – through his recent 'reassurances', now realises that the big fear from foreign investors is land-grabs, together with a question-mark over ownership and security of tenure.
However, until this is clarified by Parliament in a legal framework, neither Ramaphosa nor the ANC can offer air-tight guarantees.
Secondly, expropriation without compensation is framed within a narrative that – rightly or wrongly – implies an attack on private property. The messaging and language of this debate has been so damaging that balanced and coherent analysis is often lost in emotion and histrionics.
Thirdly, unless the land debate is managed responsibly, changes to the Constitution may also be seen as an incremental beginning of further state encroachment. Once you start a Constitutional process, you set a precedent – especially if populist solutions are needed to shore up political support (and economic meltdown) in future.
Emerging market context
To make matters worse, emerging markets are under severe pressure as a rising US dollar, interest rates and the makings of a trade war between Washington and Beijing all take their toll and propel investors towards safer havens.
Emerging market currencies are tumbling, adding external vulnerabilities. From Turkey to Argentina, contagion pressures compound the Rand’s woes. Hardly the time, therefore, to open an additional populist flank by debating the independence of the South African Reserve Bank!
To top it all, despite an intention to scale back public sector salary increases, Eskom workers have been granted an above-average 7.5% wage increase, stalling a much-needed rationalisation of state expenditure.
South Africa is really pushing its luck with Moody’s, as we face another tense time watching the ratings agencies judge our performance.
It may be a cliché, but the old adage: “When you find yourself in a hole, you should stop digging” seems apt in South Africa’s case. Yet we take no such advice.
For Ramaphosa, this broader economic slump is reaching crisis point. Fuel prices continue to rise as a result of currency weakness putting pressure on the poor in particular and contributing to higher inflation. Any stimulus from the public sector to kickstart the flagging economy has now stagnated as capital expenditure flatlines. Growth rates for this year have been dramatically revised downwards after the ‘Ramaphoria’ of only a few months ago.
A political vice
Ramaphosa is locked in a political vice, as his party grapples with the land issue amid their own deep divisions and the ANC’s damaging acquiescence in allowing the EFF to steer the debate.
With an election looming, obfuscation on an acceptable solution is damaging the domestic economy. With declining job prospects, rising poverty levels and a broad-based slump in disposable income for millions of South Africans, inequality and its populist political solutions can gain further traction.
Trouble is, the coming election is compelling leadership to pander to narrow political ends. Real decision-making therefore may only be expected – perhaps – in the second half of next year, assuming a successful mandate for Ramaphosa.
A glass-half-full view points towards post-election revival. But in the interim – at a time when it can ill afford it – SA loses ground both economically, and in declining sentiment.
The nexus between global and domestic pressures does present SA with a perfect (and dreaded) storm of unease – yet there is so much more we could, and should be doing, to protect ourselves. We deserve better.
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