Can Ramaphosa Halt South Africa's Rot?

8 MINS READJul 22, 2019 | 10:00 GMT
South African President Cyril Ramaphosa stands during the national anthem before delivering his annual State of the Nation address to parliament in Cape Town on June 20, 2019.

South African President Cyril Ramaphosa stands during the national anthem before delivering his annual State of the Nation address to parliament in Cape Town on June 20. The odds that Ramaphosa will be able to turn around South Africa's economy are getting ever longer.

  • Despite President Cyril Ramaphosa's influence on the relative success of the ruling African National Congress (ANC) in South Africa's recent general election, he will struggle to push through tough reforms due to divisions within the party.
  • Corruption and mismanagement will prove difficult to stamp out, especially as top-down national efforts fail in the face of pervasive graft in hundreds of municipalities.
  • Splashy efforts to ramp up foreign investment will flounder as poor economic data and the ANC's unwillingness to coherently tackle the country's systemic economic deficiencies remain.

On July 15, South Africans tuned in to witness a sight few on the continent ever expected to see: a former African leader getting a grilling from a corruption commission. But while former President Jacob Zuma's appearance before South Africa's Judicial Commission of Inquiry Into Allegations of State Capture (popularly known as the Zondo commission) was notable — given that the vast majority of former African leaders accused of such impropriety never face such questioning — his presence belies the gravity of the situation South Africa faces. In fact, nearly two months after the ruling African National Congress (ANC) won an election to give the new president, Cyril Ramaphosa, an ostensible mandate to push through pro-business and anti-corruption reforms, details on the country's plans to breathe life into the moribund economy are either vague or fanciful.

Instead, evidence is mounting that Ramaphosa remains weak and that he will have no choice but to make politically expedient promises to protect his administration (to the likely detriment of tougher, long-term fixes). As corruption and mismanagement continue to hinder the country from ending its economic malaise, the prospects of a turnaround in South Africa dim by the day.

The Big Picture

More than a quarter-century after the end of apartheid, South Africa remains one of Africa's key economic powerhouses. However, the country's descent into graft and mismanagement has hurt its ability to overcome its more daunting challenges, particularly crushing unemployment. As President Cyril Ramaphosa looks to turn the ship around, tackling corruption from top to bottom is a crucial goal.

All the Old President's Men

Ramaphosa is a popular figure whose personality provided just the electoral boost the ANC needed following years of scandals surrounding Zuma. But even after securing a respectable victory for the ANC on May 8, the reality that Ramaphosa and his allies are but one faction in the wider party has become even more obvious. In fact, just before Ramaphosa gave his State of the Nation address on June 20, Zuma's allies — including some with shady connections to ongoing corruption investigations — received key ANC parliamentary committee chairs, such as finance and transportation. And while it appears that Ramaphosa and his anti-corruption allies have opted to take the slow, judicious approach to weeding out corrupt individuals from the ANC and the government, this cautious approach may, in fact, embolden hardened and corrupt factions if they view the motions against them as weak. Taken together, the developments merely highlight Ramaphosa's inability to bring his weight to bear on his unruly party.

But the ruling party itself is not the only place where Ramaphosa's influence is clearly challenged. On June 26, South Africa's auditor general released a municipal audit report on the country's 250-odd municipalities, noting that their finances worsened in 2017-2018. More distressingly, the report gave just 8 percent of all municipalities a clean bill of health, compared with 14 percent in the 2016-2017 audit. Worse, authorities failed to even audit the vast majority of municipalities due to a pervasive climate of intimidation.

This graphic shows the percentage of South African employees who have observed improprieties on the job.

Furthermore, a recent survey from the Ethics Institute noted a sizable increase in the number of South Africans witnessing misconduct in their corporate jobs, rising from 14 percent in 2013 and 25 percent in 2016 to 31 percent this year. At the same time, the survey noted that citizens were loath to report misdeeds out of fear of retribution. Ramaphosa's efforts to root out corruption notwithstanding, the latest municipal audit report and the misconduct survey duly highlight the difficulties facing a top-down, anti-graft campaign when the grassroots are also rotten and potential whistleblowers are too fearful to report.

Sitting in the Dark

Unfortunately for Ramaphosa and his allies, the president's hands are tied by the internal machinations of the ANC. A vast enterprise with many competing factions — both in terms of ideology and in the fight for resources — the ANC has drifted into graft and mismanagement after more than a quarter-century of continuous political dominance. This situation will prove especially difficult for the party's internal reformers to straighten out for one simple reason: Upending established practices or patronage networks immediately hurts the group that benefited from the system, fueling anger and, in all likelihood, retribution. At the same time, such reforms won't immediately trickle down to those it is intended to benefit (poor South Africans agitating for better service delivery in the townships, for example). This lag could especially destabilize someone like Ramaphosa, who already finds himself in an unenviable position. In fact, on July 19, South Africa's public protector issued a report that accused Ramaphosa of an irregular campaign finance contribution, effectively violating the South African Constitution and ethics codes. Such a charge will almost certainly embolden Ramaphosa's detractors in the opposition and within the ANC to consider actions to remove him in the national parliament. While such actions will likely fail, the development underscores how the use of corruption investigations and charges can go both ways and be used as political ammunition. And complicating the president's task, South Africa's stringent employment laws make it very difficult and time-consuming to fire individuals (especially government employees) for major problems like gross incompetence.

South Africa's state-backed companies have lost billions of dollars over the years, but Ramaphosa is adamant that he doesn't wish to risk any political backlash in the pursuit of economic efficiency.

Given this reality, Ramaphosa has caved on key economic reforms. Bowing to powerful union pressure, for example, he has ruled out job losses or privatization at Eskom, the embattled and inefficient state power utility. On the contrary, Ramaphosa actually agreed to a multiyear pay increase for Eskom's bloated workforce, which the International Monetary Fund estimates to be overstaffed by an alarming 66 percent. And as Eskom workers receive raises, many South Africans are left in the dark due to a skyrocketing increase in electricity prices — a rise that is only likely to continue. Meanwhile, an increasing lack of capacity this year has also resulted in rolling blackouts and brownouts that have hurt the economy.

Ramaphosa's unwillingness to pursue tough measures like eliminating jobs at state-owned enterprises does not end at Eskom, as he has also backed away from downsizing at similarly unprofitable companies like the South African Broadcasting Corp. and South African Airways (SAA). By contrast, the country's finance minister said late last year that he would dissolve the perennially indebted SAA if he had his way. But although these state-backed companies have lost billions of dollars over the years, Ramaphosa is adamant that he doesn't wish to risk any political backlash in the pursuit of economic efficiency.

The Limits of 'Ramaphoria'

Since coming into office, Ramaphosa has focused much of his rhetoric and time on attracting foreign investment. He even boasted that his administration would eventually secure $100 billion from outside backers. However, despite some initial projects, mostly funded by Saudi Arabia and the United Arab Emirates, South Africa's investment climate has been conspicuously quiet. That's because there has been little substance to back up the investment pitch of the splashy "Ramaphoria" that accompanied the president's rise to power; if anything, economic indicators have even worsened for the country. For starters, South Africa's already high official unemployment rate actually increased from 27.1 percent at the end of 2018 to 27.6 percent in the first quarter of 2019. Data from late June also show that the economy added just 22,000 non-agricultural jobs in the first quarter of 2019, down from 87,000 in the previous quarter. This means that many more citizens have joined the pool of more than 9 million unemployed South Africans.

These graphs depict South Africa's economic slide.

Moreover, business confidence remains very weak overall. Notwithstanding Ramaphosa's relative popularity with the business community, there are few signs that the uncertainty surrounding the country's policies has improved. Instead, Ramaphosa has backed the ANC's controversial policy goal of land expropriation without compensation, thereby spooking international and local investors. To make matters worse, Ramaphosa has provided next-to-no insight into the future direction of the policy, which could have severe implications for foreign and local businesses — apart from telling investors "not to worry." In addition, the president and his team have been slow or unable to cut red tape for foreign investors, as South Africa remains hamstrung by a rigid labor market, including high salaries and barriers to hiring and firing employees, along with other problems that complicate business.

In the end, the May electoral victory provided Ramaphosa only a temporary boost. His weak hand in the ANC's internal politics, the festering ills of corruption and the country's bleak economic situation will all ensure that his administration remains on the defensive for the foreseeable future. Needless to say, such a situation won't help South Africa escape the economic doldrums and will hurt the ANC in future polls.

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