Will 2020 will be the year of great political reform in South Africa? This is the question I was asked to address just a few days ago at the annual forecast dinner of the Rand Business Club. This is what I told that club.
The tradition of this dinner, which we admire because too many analysts get away with being wrong all the time, is of hard calls and no fence-sitting, and that is what you will get from us tonight.
I have been asked to speak on the question of whether 2020 will be the year of great political reform in South Africa. The answer is no.
The reason is that there are virtually no reformists.
The government and the ANC are split into two camps. The one is a camp of leftist ideologues, trade unionists, and the communists. The other is the reincarnated state-capture alliance of the past decade. Mr Ramaphosa belongs a bit to both – remember he chaired the deployment committee of the ANC for much of the past decade – but spends most of his time rattling around in the void between the two. The pragmatic centrist ANC of the 1994-2007 era (that drafted GEAR, took the growth rate to over 5% of GDP, doubled the number of people with jobs and secured a budget surplus) no longer exists – having been crushed in the void.
As for his own future, Mr Ramaphosa will probably not complete his term and will be removed, not this year, but in 2022, by a Paul Mashatile or David Mabuza alliance of sorts. Prosecuting his rivals out of the running is the only sure way to prevent this. We are told that charges could be brought against Messrs Ace Magashule and David Mabuza shortly…. Certainly should such prosecutions go ahead they will end in convictions. However, we remain very skeptical.
But even if both gentlemen, and the bulk of the state capture camp, are arrested, prosecuted and jailed, do not make the mistake of thinking that this opens the way to structural reform. The arrests and prosecutions are being encouraged and engineered by the leftist camp of the ANC, which would profit handsomely from successful prosecutions but is deeply averse to structural reform.
Consider the practical example of an issue as critical to our country’s long-term success as property rights:
Both ANC factions support the expropriation of things ranging from pension funds and shareholdings in firms to fixed property. The state capture faction sees the potential to loot the proceeds. The leftists want to apply these to bringing about a great socialist revolution. The two camps will continue to fight each other and one side may even destroy the other, but that matters little as in policy terms not a great deal will change.
Be very wary, here, of the second and third waves of state capture. The first wave related to the looting of taxpayer funds directly out of the fiscus to finance patronage networks. But this source of cash is drying up, which you can see in the deficit and government debt levels. Hence, the second wave of state capture is now commencing whereby the last pockets of squirrelled-away public money are seized (moves on UIF surpluses and development bank funds are recent examples) as the government and the ANC pivot their state-capture model away from public money towards the private money held in pension funds and banks.
This pivot will culminate in a prescribed assets scheme – with banks and related institutions being ‘compelled’ to invest in state ‘development’ projects. And various custodial and regulatory expropriations, mainly in the name of transformation, will take place across all sectors of the economy. Keep your eye on what is happening in energy that now has the potential to give rise to a state-capture enterprise on a scale that will rival anything of the past decade.
In time, more people will realize – what is already apparent – that it was quite mad to think that without a single successful state-capture prosecution, and many of the leading suspects still being in the government and the ANC, that large amounts of cash could be raised for rebuilding failing infrastructure without that cash being applied to finance a new wave of state capture. State capture continues. It is as healthy and successful as it has ever been. Only the business and financing model has changed. Once private funds are exhausted, there may even be a third wave of state capture whereby foreign assistance funds will be laundered to keep the cadre-deployment networks going.
In the absence of policy reform and with continuing corruption, we see a growth rate for this year of somewhere between 0% and -1%, a budget deficit lurching to beneath 6%, and government-debt levels that may exceed 100% of GDP towards the middle of this decade. The jobless rate will increase. South Africa’s share of global GDP will decline as it has done for the past decade. Levels of violent protest action and racial nationalist rhetoric will increase.
There is only one way to break this tragic economic and political spiral and that is the political defeat of the ANC. This is now a necessary condition for South Africa’s economic and political recovery.
Intriguingly it is also something that we think may happen if not in 2024 then in 2029. The ANC’s 57% support level – what it obtained in last year’s election – is misleading in the sense that among younger, urban, and better-educated voters its support is now flirting with the 50% mark, and on urbanisation, education, and demographic trends alone its defeat in 2024 should be on your radars, as a point has been reached where in addition to asking ‘What will the ANC do with the country?’ you should begin to ask ‘What will be done with the country if the ANC is not in power to do it?’
Within the DA, the correct back-to-basics attempt at rebuilding is ongoing. But the institutional damage inflicted within that party over the past five years was so severe that its ability to sufficiently exploit ANC weaknesses must still be established.
While the DA remains very important it may not be from there that the defeat of the ANC is eventually secured. There are now numerous examples around the world where left-of-centre political parties that lose touch with their supporters are removed not by centrist or liberal parties but by populist right-wing parties. Our polls suggest that there is a market for right-wing populism in this country – not the camouflage-clad horsemen of the old clichés of the South African political right, but rather a conservative and black-led populist right. Herman Mashaba’s anti-immigrant but also staunchly anti-socialist politicking has many Trumpian hallmarks and, if properly marketed, could take off. I don’t know if he will succeed at that, but this does not matter for even if he fails, having left the precedent of a black conservative party on the record, others may be inspired to take it up.
Turning to happier things; the biggest political event of the year for South Africa will be the election in America. The difference between a Trump and say a Sanders or Bloomberg White House will be considerable both for the world and South Africa generally and for those of you who I am sure have already expatriated much of your wealth.
While Hillary Clinton won the popular vote in 2016, Mr Trump won the electoral college vote by 304 to 207 – a margin of 97. In other words, had 49 electoral votes gone to Mrs Clinton, she would have won. The incredible thing is just how close that race for electoral votes was. In Wisconsin, Michigan, and Pennsylvania, Mr Trump’s collective popular vote margin of victory was 77 744 out of 13 233 376 votes cast, giving him 46 of those electoral votes.
Prior to those victories, the last republican presidential candidate to win either Pennsylvania or Michigan was George H W Bush in 1988. The last time Wisconsin voted for a Republican presidential candidate – Ronald Reagan – was in 1984. Add Florida – which Trump won by 112 911 out of 9 122 861 for 29 electoral college votes – and you realise that November will be a close-fought thing.
However, given record-low unemployment numbers and record-high stock markets (that scare us, given the extent of a decade of stimulus infusion amidst very low interest rates), and the fact that if he does not invade Iran, Mr Trump looks set to join the minority of US presidents who have not commenced a new war in their first term (a colleague referred to him as a peacenik), our call, in the tradition of this dinner, is that if the US economy and markets hold up (which we expect), then Mr Trump is going to win a second term as president of the United States.
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