On 25 May, Cyril Ramaphosa will be inaugurated as president of South Africa, having dragged the African National Congress (ANC) over the line in the 8 May election. The ANC gained a 57 per cent majority, its lowest vote since 1994, its status as national liberator deeply eroded by successive corruption scandals. Only Ramaphosa’s personal popularity stopped it haemorrhaging more support.
His sustained action against corrupt public servants and promises of job-creating economic growth has attracted support from beyond the ANC’s base, including a significant minority of white voters, and generated significant international goodwill. Ramaphosa now has a short window of opportunity to reset social democracy in South Africa before the political cycle of municipal, party and national elections from 2021 to 2024 forces his attention back to party politics.
But personal popularity is fickle, and goodwill alone will not turn around the ailing economy. To attract investment and keep the electorate on side, Ramaphosa’s government needs to move beyond pragmatic crisis responses and articulate a clear, shared vision for how market intervention can allow the economy to grow while simultaneously delivering social transformation.
Growth will be hard to achieve in the short term. The economy is expected to grow 1.2% in 2019 and 1.5% in 2020, according to the IMF. Consumer confidence remains subdued, and a decade of declining GDP per capita and increasing inequality has put a strain on households. A ‘fiscal stimulus’ in 2018 delivered very little new government spending, and over the past 10 years, the government wage bill has increased three times higher than the rate of inflation.
Eskom, the state electricity provider, has debts equating to the GDP of Latvia and is not the only state-owned enterprise (SOE) that has required bailing out by the government. There are plans to break up Eskom into three separate entities but calls for deeper reform – or even privatization – are growing.
The president’s responses to these challenges will go a long way to defining ‘Ramaphosa-ism’ and the role of government in pursuing equitable economy growth.
Economic expectations under Ramaphosa
Ramaphosa was a champion of the introduction of a minimum wage and a proponent of the National Development Plan, which relies on growth to drive job creation. His support for land reform is an individual conviction as much as it is a party line, although his views are softer than many in the party, with state-owned land being the initial target.
Investor uncertainty on land tenure and regulations in mining will need to be addressed through passing key pieces of legislation on land reform and the revised Mining and Petroleum Resources Development Act.
Where Ramaphosa differs from his predecessors is his links with business. Thabo Mbeki enjoyed a relationship of mutual respect with business; this disintegrated under Jacob Zuma. Ramaphosa, however, is part of South Africa’s business community, having founded the Shanduka Group, with investments in multiple sectors including retail, telecoms and extractives, and served as chairman of MTN and Bidvest. As president, he has surrounded himself with close economic advisers from business and banking.
In the short term, anti-corruption measures and competent appointments will ease investor woes. In the long term, there is a need to improve the ease of doing business, including labour market reforms, and to make South Africa a more competitive business environment by reducing the hold of large conglomerates on the economy. Ramaphosa may also make greater use of public-private partnerships for large projects.
Ramaphosa faces few immediate political challenges. The ANC is still deeply divided, but although Ramaphosa does not enjoy the ideological support of the entire party, his opponents are leaderless post-Zuma, and have been unable to offer a coherent alternative. ANC Secretary General Ace Magashule has fallen into the role of interim figurehead of this faction, and allegations of corruption would make it difficult for him to aspire to national leadership.
The need to avoid splits before the election meant Ramaphosa had to make concessions, and his first cabinet in February 2018 included opponents and those accused of corruption or incompetence, such as Malusi Gigaba and Bathabile Dlamini. Such concessions to political opponents are unlikely to continue after the election.
Meanwhile, opposition parties made some advances in the election, but where Zuma was an easy target, they are still grappling with how to confront Ramaphosa. The party with the biggest gains was the Economic Freedom Fighters, whose increase of just over 4 points from the last election gave it 11 per cent of the vote this time. They will likely continue to be an effective disruptor. Ramaphosa may also be challenged by trade unions on his reforms, notably over any break-up of SOEs.
But the biggest and most immediate external political challenge for Ramaphosa will be rebuilding trust between government and society, in a context where social protest has become an alternative form of political participation. A turnout of 65 per cent may be considered normal in Western democracies but is a notable drop for a country as politicized as South Africa, driven by frustration and a sense of exclusion as much as apathy. Turnout by young people was even lower.
Achieving the vision
South Africa has all the platforms it needs to project its renewal and attract vital external investment – it is a non-permanent member of the UN Security Council, it will take over as chair of the African Union in 2020, it is a member of BRICS and it is the only African member of the G20. But in the recent past, it has struggled to tell a coherent story about its vision for the future and offer to the world.
In the immediate wake of the election, internal and external political constraints will ebb. Ramaphosa must act fast to deliver results before the election cycle starts again. To attract much needed investment stimulus, he will not only need to articulate and market his vision for South Africa, but also outline how he plans to achieve it.