The real challenge facing President Ramaphosa
South Africa continues to recover from a kleptocratic government, where, to be honest, almost any government could have done better. In terms of stamping out corruption, progress seems to be made. But stamping out corruption isn’t enough. Overall business confidence in South Africa is low and the test now is whether Ramaphosa can make any meaningful impact on the economy.
With an election on the horizon, the ANC has ramped up the populist rhetoric and some of the most disconcerting policy changes put forward are:
1) Land redistribution without compensation
Ramaphosa continues to reiterate that this will not be a smash and grab like Zimbabwe. But how the government intends to take land while not compensating people for it and improving the economy and farming productivity at the same time remains to be seen.
2) Lack of willingness to make significant amendments to the Mining BEE charter
In South Africa, the more successfully a firm implements Black Economic Empowerment (BEE) when compared to their overall sector, the easier it is for that firm to do business. However BEE is a financial burden to firms, as most beneficiaries of BEE don’t have money to pay for the stock. The last minister of mineral resources, Zwane, who has been implicated in several corruption scandals, put forward a charter last year without consulting the industry or mineral resources department. This proposed charter is immensely punitive to the industry and resulted in a complete breakdown of communication between industry and government. Industry wants Zwane’s charter moderated to one that is more business and investment friendly, and Ramaphosa assured them that a far more business-friendly charter would be agreed upon. But over the weekend, the new minister of mineral resources, Mantashe, has come back saying the proposed charter would be largely untouched. Rand weakened significantly on the news and there seems to be no more certainty in this capital-heavy industry than there was under Zuma.
All this points to a Ramaphosa government still hamstrung by opposing internal factions. Until the 2019 elections have been held and the populist electioneering stops, South Africa will be in for a turbulent ride. There is more risk to Rand weakening than strengthening at this stage, unless Ramaphosa can quickly address the two issues above.