The reformer that never was

Frans Cronjé | Jun 02, 2019
The truth is, South Africa now has a Cabinet wholly bereft of the ideas necessary to turn the economy around.

We were told it would be so different. Jacob Zuma needed to be defeated at Nasrec in order for Cyril Ramaphosa to come to power. He was a great reformer who would use the months between Nasrec and the 2019 election to consolidate his support and secure a strong mandate for the ANC, after which, with his hand now strengthened, he would appoint a reformist Cabinet that would put South Africa firmly on the path to economic recovery. 

Despite the dearth of evidence, the analysis was parroted so often that it became lore. On Wednesday it all came crashing down.  

Writing in Rapport and Politicsweb, R W Johnson delivered the most intelligent comments yet about South Africa in the aftermath of the election.

Cyril Ramaphosa, he wrote, ‘enjoys the enthusiastic support of the business and financial world. He will need all the help he can get. But he still clings to many orthodox ANC platitudes: there will be no privatization; there will be no recourse to the IMF; inflation-plus wage increases have been granted to the civil service and the staff of state-owned enterprises, though no one has any idea how to fund them; there will be an immensely expensive national health service which also cannot be funded; he will legislate the expropriation of property without compensation though in a way which does not frighten investors away; he has legislated a minimum wage policy which is already putting more poor people out of work. It may be, of course, that all this has been done or promised simply because Ramaphosa was desperate to win the election and that he will start backing away from all such promises now that he has been elected. But the worrying possibility exists that Ramaphosa actually means what he says, in which case he has yet to understand properly how dire is the situation that he and the country are in and how large are the challenges that he thus faces.’ 

Written a week before Wednesday’s Cabinet announcement, Johnson’s scepticism has, as ever, proved to be on the mark because the Cabinet is truly awful and wholly bereft of the ideas necessary to turn the South African economy around.  

At a figure approaching 30%, South Africa’s unemployment rate is three times the emerging market average. It is the primary reason for persistent poverty and the primary driver of social and political instability. The ANC itself describes unemployment as a ticking time bomb. But the new labour minister is a hardened trade unionist (he led the destructive South African Democratic Teachers Union and is deputy national chairperson of the South African Communist Party) who will block each and every move towards labour policy liberalisation.  

South Africa regularly records trade deficits with most of its trading partners except for the United States and non-oil producing African economies, while the share of GDP accounted for by manufacturing has fallen by half over the past two decades. But the new trade minister is another ardent trade unionist, protectionist, and leading communist. He has serious misgivings about private sector investments and promotes instead a model of state-directed industrial expansion. Already his appointment has gone down very badly with key trade partners and large multinational investors. 

At the science and technology department, his Cabinet colleague is the head of the communist party – another stickler for a heavily regulated and state-driven economy. The appointment is virtually assured to smother the innovative business sector and reduce South Africa’s global economic competitiveness.   

Despite the great harm caused by the government’s threats to confiscate private property without compensation, the justice minister is a prominent advocate for amending the constitution to allow the state to seize property without compensation. The risk is that under his influence the government will proceed apace with efforts to dilute property rights which will write off South Africa’s prospects of attracting much by way on new fixed investment. 

Approximately half of children will not complete their schooling and less than 5% will pass maths in matric with a good grade – indicators that condemn many children to a life of poverty. But the education minister is the same person who has presided over the school system for years. She is not expected to do anything differently – but to proceed rather with the same failed policies that undermine parental choice in education and dilute the authority of school governing bodies. 

The finance minister is fine, but his future in that role is a point of much speculation. His new deputy, and possible successor, David Masondo (a former chair of the Young Communist League), will however be sending ripples of fear through financial markets and the investment community. Consider this extract from a report in Business Insider: ‘Masondo has strong leftist leanings – in 2011, he started his budget speech in Limpopo with a quote from Karl Marx; in a column in 2018, Masondo advocated that…“the land [must] become[s] public property under the custodianship of the state, and it is leased to South African citizens and non-citizens based on socio-economic needs…”.’ 

Debt levels have doubled in a decade, and the budget deficit is a multiple of the economic growth rate, but a Marx-quoting ideologue may be the man tasked with leading an economic recovery. 

Even the stiflingly sycophantic business community was cautious in its reaction to the Cabinet, with Business Leadership South Africa writing: ‘We hope that the continuity and change that has anchored the new structure and composition of the cabinet will stabilise our institutions, sharpen the capacity of government, and build efficiency and agility in decision-making and the delivery of services.’ There was none of the unqualified heaven-on-earth endorsements of the past 18 months.

Business Day, which had served as Mr Ramaphosa’s de facto public relations agency in the run-up to the election, delivered a rebuke, writing in an editorial that ‘President Cyril Ramaphosa’s new cabinet is not the lean, mean, business-oriented machine that many in business had hoped for…’, adding that in ‘the first year of the Ramaphosa presidency the reality has been that nobody has wanted to take the hard decisions. Ramaphosa himself has been the main culprit…’.

But the best read on the Cabinet was delivered by the currency. Despite the complicated offsetting backdrop of the US/China trade battle, that the rand was trading 3% weaker on Friday than on Monday suggested that the Cabinet had not been read in financial markets and investor circles as a great reformist leap forward.

What did you want him to do better, a friend with ANC sympathies wondered? A colleague asked, what were investors expecting? ‘Mr Ramaphosa must make his picks from within the ANC and this is the best the ANC now has to offer.’

But while his hands were tied in some respects, Mr Ramaphosa’s choices in key ministries are so bad and so at odds with the reformist thinking South Africa needs that Johnson’s speculation about the ‘worrying possibility’ that ‘Ramaphosa actually means what he says’ is likely on the money and so, too, the implication that he ‘has yet to understand properly how dire is the situation that he and the country are in’. 

With his ‘A-Team’ – as Iqbal Surve’s newspapers hailed the new Cabinet – behind him, he is sure to find out.    

 

Frans Cronjé is the CEO of the Institute of Race Relations

 

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