Although South Africa remains a regional economic and political heavyweight, its economy, beset by a number of problems, is mired in the doldrums. As noted in Stratfor's forecast for the second quarter, widespread unemployment, an expensive and unreliable electricity supply, declining educational standards and a host of other issues continue to bedevil South Africa’s leaders as they try to turn the economic malaise around.
In what amounted to a ruling party debate about government financial policy that was aired in public, South African Finance Minister Tito Mboweni on June 5 denied that the government will broaden the mandate of the South African Reserve Bank to allow it to tackle the country's economic growth and unemployment problems, Reuters reported. Mboweni's statement directly contradicted an earlier comment by Ace Magashule, the powerful secretary-general of the African National Congress, about expanding the central bank's role in managing the country's ailing economy.
As the country's leaders try to battle widespread unemployment and stave off recession, the ANC's influential members are floating their own policy ideas.
Why It Matters
The latest back and forth in the long-running discussion over the role of the central bank lays bare the South African government's uncertainty over policy in a number of areas as well as disagreement among powerful figures within the ANC. As the country's leaders try to battle widespread unemployment and stave off recession, the ANC's influential members are floating their own policy ideas. As far as the direction of the central bank, however, the denials by Mboweni and other key figures, such as from senior ANC economic adviser Enoch Godongwana, strongly suggest that neither the institution's responsibilities — nor its institutional independence — will be changed any time soon.
What Happens Next
The policy disagreement highlights the challenges that President Cyril Ramaphosa will face in his first full five-year term in office, which officially began May 25. Economic data released June 4 indicated that the country's economy had contracted by 3.2 percent in the first quarter of 2019, adding to the pressure on the president to deliver better results. As such, his response to statements that create policy uncertainty, such as Magashule's statement, will be important to watch. But as ANC factions jockey for power, preventing senior party officials from speaking out of turn will be difficult. As Ramaphosa is no doubt aware, presenting a unified message about the country's direction will be a key to winning over skeptical investors that the South African economy desperately needs.