Here’s why Ramaphoria is now well and truly dead

 ·12 Jun 2019

Sentiment towards South Africa, both inside the country and abroad, has soured, as investors look for action and dramatic policy changes, but are instead met with the same uncertainty that has lingered over government’s head for some time.

This is the view from Intellidex analyst Peter Attard Montalto, in a new column published this week.

Headlining the negative view of South Africa is the ANC’s poor handling of mixed messages around the independence of the South African Reserve Bank.

Following an ANC National Executive Committee lekgotla at the start of June, the party announced outcomes from the meeting, which included a resolution to expand the mandate of the South African Reserve Bank, and talk of “quantitative easing”.

Markets reacted negatively to the message, which was seen as another attack on the central bank’s independence. This spurred finance minister Tito Mboweni, and ANC head of economic policy Enoch Godongwana to issue statements of their own, saying that this was not the case.

This resulted in a back-and-forth between factions within the ANC, delivering conflicting views – with president Cyril Ramaphosa only emerging three days later to put an end to mess.

According to Attard Montalto, the Reserve Bank issue – and the length of time it took for it to be resolved – is a sore point for investors, who ultimately don’t care for the ins and outs and minutia of the politics, but seek clarity and certainty on key matters.

“Investors look for some simple bedrocks of countries to invest in – like low, stable inflation emanating from a credible independent central bank. A reserve bank that is not printing money to fund government inefficiencies that crowd out the development of the private sector is another simple ask,” he said.

“Investors treat central banking issues as a sign of maturity in an economy. Can you keep your hands off the kitty or are you looking for easy ways out to avoid doing challenging structural reforms?”

With the latest communication blunder from the ANC at Luthuli House and in government, South Africa failed in this regard – and while Mboweni and Godongwana’s statements were welcome and necessary, they came far too late. As did Ramaphosa’s final say.

“The error should have not happened in the first place, but if it did, it should have been corrected within hours. An instinctive reflexive reaction should have meant that internal balancing was set aside to make the correction and stamp authority,” the analyst said.

Instead, what was revealed by the whole saga is that ‘implementation’ and leadership have not moved forwards to somewhere new after the elections, he said.

“How is a massively complex issue like Eskom – involving multiple stakeholders with conflicting requirements – meant to be dealt with if a simple statement cannot be corrected in time?

“This is why Ramaphoria has been killed off now quite so decisively.”

According to the ANC, its standing policy is that the Reserve Bank should be owned publicly instead of privately; however Ramaphosa said that now is not the time to be focused on this matter, as the country works towards growing the economy.

You can read the full column here.

Read: The one way Ramaphosa could change how he runs his office

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