Research and Policy Brief: South Africa 2010 - Frequently Asked Questions. 30th September 2010.

The Institute delivers a range of briefings and scenario planning sessions to its subscribers. These are often followed by long question and answer sessions. Most of the briefings are delivered to groups involved in business and with significant investments in South Africa. We have also met with approximately 50 senior business leaders over the last six months. In this article we have written up the most common questions put to us over those six months together with our abbreviated answers.

Q. Does the ANC not understand the damage that it is doing to investor sentiment?

A. You have got to understand decision making processes in the party. They are actually extremely democratic. The branches really have a say in the policy adopted by the party. That opens the party up to being hijacked by populist elements and the like who take advantage of the fact that many who have a say on ANC policy do not really understand how a modern economy works, have no real grasp of supply and demand for example, and do not appreciate the importance of growth over redistribution. It is therefore quite possible that the party adopts a policy that runs contrary to the ideas of some if its senior leaders. The lesson is therefore not to have too much faith in the presence of a Trevor Manuel of Pravin Gordhan in the ANC as they can easily be steamrollered on policy.   

Q. Who is actually in charge on the country?

A. The answer is perhaps that no-one is. On this or that issue a certain faction in the Government or the ANC holds sway, but there appears to be little co-ordination in the work of Government or Governance in the country.

Q. Who is calling the shots in the tripartite alliance?

A. I might describe the ANC as a shattered mirror. On any particular issue the splinters arrange themselves into two or three factions. They then re-arrange themselves on the next issue. Therein lies the trouble in trying to identify who leads the ANC and on what issue. COSATU and the SACP are able to exercise enormous sway over the alliance as they are not as fractured as the ANC is and therefore hold more coordinated positions on policy.

Q. Will Zuma stay in power?

A. Zuma has disappointed in failing to take the strong decisions necessary of the leader of the country. Where he has tried the take a stand, against Julius Malema for example, he has faced a backlash from within the party. This is a comment on the bitter nature of the factionalism that has gripped the ANC. As long as Zuma lies low and takes no major decisions, he may survive his first term.  

Q. Who will replace him?

A. As party leader and then president of the country it’s a bit up in the air at the moment. But keep an eye on a leadership tussle developing between Mathews Phosa and Tokyo Sexwale. Phosa coming to power may signal a turnaround in the flagging fortunes of the ANC.

Q. How important is Julius Malema?

A. His popularity ratings sit at around 21% - much lower than many people realize. Jacob Zuma’s ratings are almost twice as high. He obviously has significant leadership ability and confronted with real responsibility may moderate his positions on nationalization for example. He is a product of his environment. When you consider the levels of poverty and unemployment among young black men, there are parts of the country where their unemployment rate is now above 50%, it is surprising that we did not have a Julius Malema earlier. 

Q. With so many poor/unemployed young people, what are our prospects for stability?

A. Even after 15 years of averaging growth rates of 3% of GDP we face large-scale violent protests and some of the highest levels of unemployment and lowest levels of labour market participation in the developing world. At the same time, the ruling party has come to demonstrate chaotic and uncoordinated behavior as it seeks to deal with the fallout of low growth. If we do not attain growth levels of upwards of 5% of GDP, and maintain those for well over a decade, then we should expect increased instability.

Q. How fast could we grow?

A. Our growth hurdles are structural more than technical. What we mean by this is that technical issues such as rand strength and interest rates can only have a marginal impact on our growth fortunes in an environment where structural impediments such as skills shortages and inappropriate labour market regulation act as bottlenecks on growth. Remove some of the structural bottlenecks and a growth trajectory of above 5% of GDP becomes quite attainable.

Q. Does the Government understand the poor state of education and that you cannot have transformation without education?

A. Not in my experience. There is a lack of appreciation of the seriousness of failures in public education. Very few legislators know the data as well as they should. At the same time, transformation is an ideological imperative and few in the Government are able to accept that there are practical constraints acting on the policy.

Q. What are your views on Africa outside of South Africa?

A. Very positive. Many of the long-term trends for the continent are the correct ones – in education, growth, and human rights. In fact, we may be more positive about the prospects for Africa than we are for South Africa, where the short-term trends are running in the wrong direction. An interesting phenomenon may be under way in that for the last hundred years much of colonial and post-colonial Africa was greatly influenced by events in South Africa. However, over coming decades that influence will decline and Africa may come to exercise a greater influence over South Africa than South Africa can exercise over it.

Q. Are we going to end up like Zimbabwe?

A. Not necessarily. South Africa is a far larger diversified economy. It has far more important investment ties than Zimbabwe ever had. In South Africa you cannot easily destroy one element of the economy and immediately topple the rest as Zimbabwe did on agriculture. South Africa also has a history of opposition politics, a small black middle class, a vibrant civil society sector, and, for the time being, a free media. Our decline is therefore likely to be gradual as opposed to precipitous as was the case in Zimbabwe.

Q. Why is the ANC opposed to media freedom in the country?

A. Self interest. Senior party leaders see the media a direct threat to themselves and their careers. This may be in part a result of the astonishingly high levels of corruption around the party.   

Q. Should we get out of South Africa?

A. Even in our worst-case scenario for the country, which is one of massive state intervention leading to levels of GDP growth of under 2% for a decade, there is still room for a small and resilient middle class. However, if land and businesses are nationalised at any level then the country will no longer be able to offer up sufficient opportunities to retain its highly qualified professionals.

Q. Can the ANC split?

A. That has been a long running scenario but I think the answer is no – at least not successfully. The fight in the party will always be about the ownership of the ANC brand. Any split will see the faction without that brand drifting into political oblivion.  

Q. What are the prospects for the political opposition?

A. The DA should certainly keep the Western Cape and may make some inroads into major local authorities such as Port Elizabeth and even Johannesburg and Pretoria. However, for the time being our politics will remain a racial census. For the long term, look to the young men protesting on the streets of the townships as a future opposition. These protests may indeed be the beginnings of black political opposition to the ANC.    

- Frans Cronje

 

Click here to arrange a briefing with Frans Cronje on the economic, political, and social future of South Africa.  

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