South Africa is facing a crucial year both politically and economically: The upcoming election will see the ANC attempt to consolidate gains made since President Cyril Ramaphosa’s appointment to office, while the country attempts to avoid a downgrade of its sovereign credit rating to sub-investment grade.
Professor in Economics, Finance and Strategy at GIBS Adrian Saville told the GIBS Economic Outlook Conference South Africa’s per capital income has travelled sideways for a decade, and that Eskom is the single biggest risk facing the country.
“Our debt to GDP ratio of 60% already takes us into sub-investment grade territory,” he explained.
However, he believes the potential for an improvement in South Africa’s economic fortunes is there: “If you get the economy right, business can be spectacular,” he added.
Chief economist at Investec Annabel Bishop said the decline in tax collections was evidence of a deterioration in tax morality.
“We must reinstall confidence that tax money won’t be stolen, but used for development and upliftment. “
Economist at Nascence Advisory and Research, Xhanti Payi, said the crisis at Eskom had nothing to do with the structure of the state-owned enterprise: “The real reason we got here is because of people stealing. It has bled billions. Eskom exists to provide power, and we have to ask whether its survival is even necessary?”
Chairperson of Rethinking Economics for Africa at Wits University, Kamal Ramburuth-Hurt, argued that there is a disconnect between South Africa’s Constitution and its economic reality.
A lack of coordination between government departments also prevented the successful delivery of projects.
Ratings and structural reform
“We need to repair ourselves structurally over the next two to three years by making Sars more efficient to ensure good returns; the repair of government finances; prosecutions of the corrupt and a return of business confidence,” Bishop said.
Director and chief economist at Econometrix Dr Azar Jammine said the mention of strategic equity partners for state-owned enterprises in Finance Minister Tito Mboweni’s budget speech was encouraging: “(Government) are starting to realise that they have to start doing something. The crucial work now is to set the path for faster economic growth from 2021, the potential is there.”
On the threat of a potential downgrade of South Africa’s sovereign credit rating, Bishop said the ratings agencies had been generous.
The threat of downgrade still existed and had already been factored in by the market in the country’s credit default swop prices and bond yields.
“I think we may be able to avoid a downgrade at the end of March, but there is a possibility of a change in outlook by Moody’s from stable to negative,” she said.
Payi argued that the recent budget might have actually increased the country’s risk of a downgrade: “The budget language is good and strong enough, but the political support is questionable.”
“The state has failed us on many levels: There is no national security, our health and education systems have collapsed and we don’t have energy security. On the basis of those four, South African politics is in a serious crisis and the biggest threat to the country is the ANC,” author and political analyst Prince Mashele argued.
Executive director of the Centre for Development and Enterprise Ann Bernstein agreed and said the ANC today was “one of the biggest obstacles to South Africa. We need President Ramaphosa to tell people how bad things really are.”
Professor Tinyiko Maluleke of the Centre for the Advancement of Scholarship at the University of Pretoria added that the country’s main opposition parties could not claim to be outside of the system of patronage that afflicted South Africa’s political landscape.
Mashele said it was important to be bold and honest when dissecting the opposition “as we are with the ANC”.
He argued the Democratic Alliance reflected the racialisation of politics in South Africa and would remain insignificant unless it abandoned its agenda of “attempting to manage black people.”
“Facts matter,” Bernstein argued.
“The DA is not perfect, but it has had an impact – the Western Cape government grew its economy and jobs. There is empirical evidence of how to move people out of poverty, it is not a debate anymore,” she said.
However, she worried that media coverage of the EFF had “exaggerated its importance and given them a patina of respectability. They are fascist, racist and violent and anti our Constitution. We better act fast, as populism is gaining ground globally.”
Chief executive of Black Women in Science Ndoni Mcunu said it was important that the youth adjust their expectations and look for empowerment in other forms, rather than from the government.
“We must begin to play an active role in democracy. The youth in South Africa have to make a decision on a less dependent relationship.”
Professor Maluleke concluded that while he didn’t expect any fundamental changes to the political landscape following the upcoming election, coverage of the VBS saga and evidence provided to the Zondo commission of inquiry into state capture meant “the South African voter can no longer claim to be innocent.”