Cape Town - There is still no clear stance on crucial economic issues in South Africa following the ANC's National Policy Conference (NPC), according to Nomura's emerging markets economist Peter Attard Montalto.
The policy conference offered nothing to hint at an escape from the low growth trap haemorrhaging the economy, Montalto told investors in a note on Wednesday after the five-day event came to a close.
"Generally, the factionalism has resulted in the conference unable to take a firm stance on issues such as the SARB (SA Reserve Bank), land or financial sector transformation – with many issues sent back to the branches. Broadly, however, there is nothing to hint at an escape from the low growth trap."
However, Montalto noted that it doesn't mean there aren’t outcomes to watch:
1. A change to the ANC constitution to make clear that MPs’ loyalty is to the party
Nomura said it finds this concerning because it effectively flies into the face of the recent Constitutional court judgment that delineated MPs’ responsibilities, and solidifies a long-standing mind-set in the ANC that it is above the Constitution.
MPs will vote in a motion of no confidence in President Jacob Zuma on August 8. Speaker Baleka Mbete is still considering whether the vote will be conducted via secret ballot.
2. Nationalisation of the SARB’s equity capital
The ANC proposed that the SARB be fully state-owned.
Although this has been on the agenda for some time, Nomura said it clearly fits into a different political context following the Public Protector’s report, in which it recommended that the SARB's primary mandate be changed.
"We see no advantage from ownership by the state for government in view of the terms of the SARB Act as it stands and the constraint of the constitutional objective. However, it is highly symbolic and important and a hint at the direction of things to come."
3. Prescribed assets are now more firmly on the agenda with a request from the NPC for the ANC to bring forward a proposal on this matter
"While we don’t think a policy on prescribed asset holdings of private investment funds is necessarily a bad thing in a developing economy, the issue is the distortion and issue of corruption in this specific South African context."
4. An expansion of social grants up to 21 years old, though the ANC admitted it has done no costing on this
This is expected to add pressure on the country's budget if this proposal is accepted at the party’s December national conference.
5. Faster financial sector transformation
No specifics have yet been given, however Nomura said it is concerned in the medium run about a copy paste of the mining charter, with added credit extension of targets. "There is more pressure now on setting up a state bank, faster."
The Mining Charter has been criticised because of a lack of consultation between the government and other stakeholders, including labour and the mining industry.
Key aspects of the Charter include an increase in black economic empowerment shareholding of all mines from a previous 26% to 30%. In addition, 50% of all board members and executive management must be black while 70% of all mining goods and 80% of all services in the mining industry must be procured from BEE entities.
New mining rights are subject to a 1% revenue payment to BEE shareholders prior to any shareholder distribution. Mining companies will have only 12 months to comply with the new charter's objectives.
6. There has been no agreement on the issue of land and has been thrown back to the branches
There has been increasing calls for a change in the Constitution to allow the seizure of land for redistribution to black people without compensation. It has been argued that the country’s laws are hindering the transformation of the economy.
"The NPC has been split between the need for a change of the Constitution and more rapid movement within the existing constitutional framework. It seems suggestions of a referendum have not gained a majority. December will therefore be important on the policy front."
7. A new veterans ministry and a pension for veterans
Nomura views this as a way of keeping the Umkhonto weSizwe Military Veterans Association (MKMVA) on board.
Recommendations by the NPC will be tabled at the party’s December national conference where it is expected to be adopted as party policy.
"The lesson of the last 10 years has been that policy recommendations from the NPC are selectively implemented and the government has seen varying but generally increasing susceptibility to implement its own policy agenda," said Nomura.
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