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Ramaphoria losing steam? - June 2018
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Ramaphoria losing steam?
South African President Cyril Ramaphosa
recently celebrated 100 days in office, three
months after Jacob Zuma was pressured
by the ANC to resign or face impeachment.
Ramaphosa faced a tough battle to secure
the ANC’s backing to succeed Zuma, with the
leadership contest exposing deep divisions
within the ruling party. But in the large, the
markets and electorate reacted positively
to his victory, and South Africa’s economy
witnessed a clear upswing in both sentiment
and real economic indicators in its wake.
Ramaphosa’s moves to change up the order
and introduce a series of reforms to tackle
the rot left by his predecessor were at the
heart of these changes. Yet the honeymoon
period may prove short, with some of that
confidence boost already ebbing. Ramaphosa
is now having to confront a series of entrenched challenges that will shape the outlook for
South Africa’s economy in the lead-up to the 2019 elections and beyond. In this note, we
explore some of the critical issues facing the new South African President.
Changing of the guard
On coming to office, Ramaphosa’s first task was to was shaped by expectations the government will
restore confidence and stability in his own party and in tackle governance issues head-on, overhaul and
government as a whole. He managed this task like the partially-privatise its bloated parastatals, and revive
consummate pragmatist and political tactician that investor interest. Efforts already underway in this
he is, extending an olive branch in some directions, regard have taken up columns of press coverage –
cracking the whip in others, and cementing a new much of it positive.
cabinet that had a robust cadre of reformists and
technocrats at its core, while pandering to politics at But beyond these headlines, Ramaphosa is also
the fringes. It was his decision to bring the likes of having to play a balancing act, which is rooted in
Nhlanhla Nene, Pravin Gordhan and Trevor Manuel South Africa’s very real need to continue pursuing its
into the centre of power that boosted the markets, transformation agenda to reverse the chronic socio-
strengthened the rand and brought about a new economic imbalances left by apartheid. africapractice
narrative around South African politics. This narrative is resolute in believing that as a savvy and respected
africapractice - 2nd Floor, 14 Cambridge Court, 210 Shepherds Bush Road, London, W6 7NJ - www.africapractice.com p.1
Ramaphoria losing steam? - June 2018
negotiator who has strong ties to both labour and business, Ramaphosa is the best person for the job of
helping South Africa to emerge from several years of stagnation and governance slide. But the sheer weight
of expectation and scale of the challenge faced are likely to mean that South Africa’s road to progress proves
bumpy and slow.
Pragmatism confronts reality
A key disadvantage for Ramaphosa is that he remains
hamstrung by a number of political and policy factors.
He won the ANC elective conference by a whisker and
therefore lacks a strong mandate from his own party,
where the vestiges of Zuma’s support networks still
operate behind the scenes. This has required him to
tread carefully in how he responds to the mess left by
the previous administration – not least because any
major party fallout could further dent its domestic
and international standing. As further evidence of
this, some key Zuma allies have remained in cabinet,
while others sit with Ramaphosa in the ANC’s top six
and National Executive Committee (NEC). Added to
this internal political issue, Ramaphosa also needs to
keep one eye on the 2019 elections, and the need to
further cement his legitimacy by leading a revival for
the ANC in this national vote.
been seen to date post-apartheid. Even with these
But beyond politics, policy is perhaps the area where assurances, landowners will need some convincing
Ramaphosa finds himself most ensnared. In recent of the merits, legality and boundaries around this
years, the ANC has seen its support eroded by the left exercise. We anticipate that this issue will remain a
and the right. While the Democratic Alliance (DA) is prominent feature of the policy debate and while it
the largest party in opposition and has made some is positive that those opportunistic seizures that have
inroads under new leadership, the ANC also sees occurred in recent weeks have witnessed a robust
Julius Malema’s Economic Freedom Fighters (EFF) response from the state apparatus, the government
as a critical threat to its core voter base in the black now needs to articulate and negotiate a plan that will
population. The departure of Zuma has removed inevitably leave some parties in disagreement.
the EFF’s main clarion call in recent years, but the
In another key policy area confronting Ramaphosa,
ANC’s policy declaration on the need to explore land
Zuma had also surprised his party and government
reform, including through expropriation without
ahead of his departure by announcing free higher
compensation should be seen as an effort to further
education, which the state has had to honour in its
clip the EFF’s wings on the left.
2018 budget. With South African public finances
Land reform is a hugely emotive issue and Ramaphosa already under strain, financing this move and
has been quick to try and appease an alarmed addressing some of the fundamental flaws in South
business community by assuring that Zimbabwean- Africa’s education system is going to put a further
style land seizures will not be the approach – rather a strain on the government’s machinery. Ramaphosa
measured system to bring landowners and politicians has ensured he has two experienced Ministers
to the table to come up with a solution that allows overseeing the dockets of basic and higher education
for more concerted redistribution of lands than has but the funding issue is likely to remain paramount.
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Ramaphoria losing steam? - June 2018
An end to the honeymoon?
While few can question
Ramaphosa’s efforts to reform
some of the workings of the
state, tackle the governance rot,
and restore confidence in South
Africa’s economy, the veneer of
progress patches over profound
divisions and challenges that
remain. At a party level, despite
the show of solidarity and unity
after the ANC elective conference,
the ruling party has remained
embroiled in bitter infighting since
Zuma’s departure. The ANC’s
provincial chapters in KwaZulu
Natala (KZN), Free State and North
West appear in disarray, with
KZN witnessing a continued spike
in political violence despite the
establishment of a commission of
inquiry to look into the problems sectors have performed poorly went on strike in reaction to the
affecting the state’s political with mining, manufacturing and power utility firm’s 0% wage
apparatus. Rumours of a party agriculture declining 9.9%, 6.4% increase offer in response to
breakaway in the province persist. and 24.2% respectively. While their 15% demand. Rival unions,
Meanwhile, the provincial elective the Reserve Bank expects that the ANC-allied National Union
conference in Free State is also economic growth will still rise of Mineworkers (NUM) and the
being challenged in court while moderately to 1.7% this year National Union of Metalworkers
in the North West, the provincial (compared to the IMF’s 1.5% of South Africa (NUMSA) have
chair Supra Mahumapelo was prediction), this remains well cooperated in their fight against
forced to resign because of major below what is required to create Eskom management, underlining
governance failures. transformative growth and jobs the extent of the stand-off in play.
Confidence has also recently creation to meet the burgeoning Eskom is one of South Africa’s
faltered in the economy after a demand from society. largest structural economic risks,
post-Ramaphosa boost. Having Moreover, South Africa continues with a R300 billion (USD21.89bn)
grown 3.1% in the last quarter of to face significant risks, notably debt and one of the largest wage
last year, GDP shrunk 2.2% in the from labour, amid mounting union bills in the country. Beyond this,
first quarter of 2018 due to a range pressures for wage rises. As an the company’s governance has
of one-off factors, nevertheless example of this, Eskom recently also come under significant
exposing the fragility of South had to implement power cuts scrutiny as one of the epicentres
Africa’s economic recovery. Most (load-shedding) after unions of corruption, through the tendrils
africapractice - 2nd Floor, 14 Cambridge Court, 210 Shepherds Bush Road, London, W6 7NJ - www.africapractice.com p.3Ramaphoria losing steam? - June 2018
of the Gupta family into the company’s former board and management. Eskom also accounts for over 90%
of South Africa’s electricity supply, a majority of which comes from domestically sourced coal. Labour and
financial risks to Eskom therefore threaten the entire South African economy, both from a productivity and
competitiveness perspective.
The way forward
South Africa is less than a year away from its National and Provincial Elections which must be held by May
2019 at the latest. The DA and the EFF both hope to make further inroads into the ANC’s majority, while the
ruling party will be seeking to use its change in leadership to revive or at least maintain its support. The last
few years have left a bitter taste in South African politics, and while we feel a major turnaround by the ANC
seems unlikely such are the divisions and legacy issues present, Ramaphosa is well set to ensure the ruling
party retains its national ruling status.
But beyond this, Ramaphosa will require more than just his charm and the dividends of post-Zuma euphoria
to avoid the ANC’s further decline. The ANC may already be forced into a compromise of coalition rule in the
economic powerhouse of Gauteng province following the elections, and could see erosion of its influence in
other areas. But the handling of the policy debate is likely to be particularly critical going forward as large parts
of the South African population hankers for greater progress, opportunity and growth. Ramaphosa’s origins
and modus operandi suggest he will remain a pragmatist and a deal-broker – attributes that will be critical to
success. But he will struggle to appease all sides and post-2019, we may see a more assertive policy approach,
not without controversies, but which creates greater certainties and direction in the South African economy.
He may be the right person for the job, but the decisions he faces will be tough. And while we remain optimistic
that South Africa is on a more positive political and economic trajectory under Ramaphosa, Ramaphoria must
be replaced by a greater sense of realism of the monumental social and economic challenges confronting the
country’s new leadership.
About the author: Roddy Barclay is the Director of the Intelligence and Analysis team at africapractice. In this role,
Roddy leads the company’s political risk advisory and business intelligence practice across sub-Saharan Africa. He has
advised clients across diverse sectors on managing their political and reputational risk exposure for over eight years,
and has developed particular expertise in the extractives, ICT and financial sectors. Roddy formerly worked as a Senior
Consultant at Control Risks. Throughout his professional career, he has spent considerable amounts of time in Africa for
research and consulting purposes, developing strong networks and a good understanding of the local risk environment.
He is also a regular commentator in the international media on African political and commercial dynamics. Roddy holds
a First Class degree in Modern Languages from the University of Bristol.
Roddy Barclay, Director of Intelligence and Analysis
rbarclay@africapractice.com
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