Zuma the barrier to Ramaphosa's new SA economy

Cape Town – Cyril Ramaphosa will have to take down several barriers before he can truly implement changes to South Africa’s economy, according to analysts.

On Sunday, in his capacity as leader of the ANC, Deputy President Cyril Ramaphosa delivered an address at Nelson Mandela’s centenary celebrations, where he spoke of 2018 being the year to effect transformation.

Among the issues to be addressed in 2018 are land reform and governance at state-owned enterprises.

Ramaphosa also said the ANC’s national executive committee will be finalising the transition of SA’s presidency on Monday.

“At the moment there is no indication, or there is no assurance that Zuma will go,” economist  Dr Iraj Abedian told Fin24. Zuma needs to step aside to enable Ramaphosa or the new ANC leadership to “do what they need to do”, he said. “Zuma is the only barrier, but a major barrier.”

Professor Jannie Rossouw, head of the school of economic and business science at Wits University, believes that Zuma will “take a chance” with a vote of no confidence in Parliament.

“Zuma is not the type of person who will worry about damage done to the party. [Thabo] Mbeki worried about that. My reading is, Zuma could not care,” said Rossouw.

Cyril’s to-do list

Rossouw highlighted that if Ramaphosa were to become president, he has to work on addressing governance at SOEs by appointing competent boards and rooting out corruption, as well as instilling investor confidence, as he did at the World Economic Forum in Davos.

When asked if Ramaphosa could still implement these changes without actually being the president, Rossouw said he could, but Ramamphosa’s impact will be more effective as president of the country. “Ramaphosa instills confidence with investors which Mr Zuma will never be able to do.”

Further to attracting investment, Ramaphosa will have to remove obstacles such as policy uncertainty, for example the Mining Charter, said Rossouw.

Economist Thabi Leoka told Fin24 that even though ratings agencies like Moody’s which have placed South Africa on a review for a downgrade, they are keeping watch for policy certainty. “They want policy certainty right now, we don’t even know what our policy is as South Africans. We are just in limbo currently,” she said.

“When someone is reviewing you for a downgrade, you have to excel in order for them to reconsider the review for downgrade.” Remaining the same will result in a downgrade, as will deteriorating. “I do not think we have improved to such an extent that we will go up one notch, as in not be considered for a downgrade.”

Leoka is of the view that Ramaphosa should tackle poverty first by uplifting the lives of the poor. This would probably involve making transport cheaper or free for the poor, who spend most of their income on transport. Government could also prioritise providing quality education to those in poor areas.

“He should also ensure a smaller component of people are reliant on social grants, as it will relieve the pressure of the social grant pool on the fiscus.”

Another task is to ensure South Africa does not breach the spending limit, in addition to shrinking the budget deficit to make sure the shortfall in revenue is much smaller. “These will be tough decisions for him to make because they won’t be popular,” Leoka explained.

Remove the rot

Leoka added that only removing Zuma is not the answer, ministers who have not performed must also be removed. “[Ramaphosa] needs to ‘drain the swamp’ to remove people who are corrupt and not doing their jobs.” Leoka referred to Life Esedimeni and the issues with social grants payments saga. “It is those ministers who are in charge of those departments, who did not do what they were supposed to do,” she said.

“Ramaphosa must remove those who will hold him back and who have held South Africa back for the past nine years. That will be a boost of confidence.”

Investec Chief Economist Annabel Bishop explained that “repairing” business confidence will be important to drive faster economic growth. Improved investor sentiment, will lead to improved fixed investment. Better economic growth will drive further investment and employment.

“At least 25% of GDP needs to be constantly reinvested in the economy via fixed investment, particularly from government and utilities, not just the private sector,” she said.

“With the perceived reduction in political risk in 2018, SA’s corporate sector and foreign investors are believed to be increasingly interested in investing in South Africa.”

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