South Africa Is Celebrating, But How Long Can It Last?
Public and investor euphoria is sweeping across the land of Nelson Mandela, but corruption remains.
WHY YOU SHOULD CARE
Because Africa’s second-biggest economy really needs a boost.
Last April, while passing through the picturesque wine-farming village of Tulbagh, I joined one of the hundreds of peaceful #ZumaMustFall protests taking place all around my country that day. I pinned a “Not My President” poster to my shirt and formed a human chain with 200 people in Tulbagh … and millions more all around South Africa.
Less than a year later, we finally have our wish. Zuma, who became president in 2009 and survived six parliamentary no-confidence motions, has been forced to resign by the very people who stood up for him on every other occasion. There’s a real sense of hope surrounding new President Cyril Ramaphosa, both on the street and on the markets, where the rand has hit a three-year high. Today the stock market is surging, but for how long?
“There’s no doubt that we dodged a bullet in December,” says James Myburgh, editor of Politicsweb, a site focused on South African news and politics. Myburgh is referring to Ramaphosa’s narrow victory over Zuma’s ex-wife Nkosazana Dlamini Zuma in the battle for ANC leadership. “But we still have to wait and see what kind of leader he will be,” he warns.
It’s all about one word at the moment: confidence.
Roger Eskinazi, managing director at WealthWorks
Ramaphosa, who got rich quick (and legally) during his years in the private sector, came across as extremely strong on corruption during his maiden State of the Nation address on Friday, but actions speak louder than words. And even if he lives up to the hype, he’ll face plenty of resistance from senior ANC provincial leaders who supported him because they see him as the best candidate to ensure an election win for the party in 2019 — not because they want him keeping their fingers out of the till.
Since his election, first as party president and now as state president, there have been some very positive signs — most notably shaking up the board of the ailing state-owned electricity supplier ESKOM and the arrests of various members of the notoriously corrupt Gupta family who were synonymous with “state capture” under Zuma. “The Guptas are easy targets at the moment,” warns Myburgh, “but [Ramaphosa will] have to tread much more carefully” when it comes to flushing out the patronage networks that surround many of his allies and enablers within the ANC.
Corruption may be the biggest buzzword, but for many analysts, one question looms above the rest: What about the land? At the ANC’s national conference, the pro-Zuma camp pushed through a resolution calling for a policy of “expropriation of land without compensation” with the proviso that this “should be pursued without destabilizing the agricultural sector, without endangering food security in our country and without undermining economic growth and job creation.”
Ramaphosa reiterated this stance during Friday’s speech — notably to great cheers in certain quarters of parliament — and it remains an open question whether he will go along with its implementation by pushing through a constitutional amendment weakening property rights or bury it as soon as he is politically able. He may justify doing so by pointing to concerns for economic growth and job creation. This is an issue, Myburgh says, that “potential investors will be watching extremely closely.”
And economic growth is exactly what South Africa needs, in spades. It has averaged a measly 1.4 percent over the last decade, and unemployment has just hit an all-time high of 28 percent. Not to mention a budget deficit that’s almost 5 percent of GDP.
From a balance sheet perspective, we’re “by no means out of the rot,” says Roger Eskinazi, managing director of WealthWorks in Cape Town. “But it’s all about one word at the moment: confidence.” While he’s quick to admit that buoyed market sentiment is not a long-term solution to the myriad fundamental problems holding back South Africa’s economy, Eskinazi is hopeful that the wave of investor euphoria can “buy us time to work out the details” — starting with this week’s budget speech, which should “contain a clear plan” on how to (begin to) balance the books.
Like Myburgh, Eskinazi and the people of Tulbagh, I don’t know if Ramaphosa has what it takes to fix my broken country. But at least there’s now a chance.
Nick Dall is a South African OZY writer based in Cape Town.