Bloomberg<\/a> has highlighted the shifting power dynamics in president Ramaphosa\u2019s inner circle, bolstering finance minister Tito Mboweni\u2019s influence.<\/p>\nThe economy, which was already in its worst state since the 2008 financial crisis, has been hit by the coronavirus pandemic and the loss of South Africa\u2019s last investment-grade credit rating from Moody\u2019s Investors Service.<\/p>\n
Absa forecasts that GDP will contract by 6.4% in 2020, \u201cbut we caution that this forecast, like all others right now, has more than the usual degree of uncertainty and downside risk\u201d.<\/p>\n
It pointed out that its forecast is very close to the SA Reserve Bank\u2019s forecast that GDP would contract 6.1% this year, and the IMF\u2019s projection of a 5.8% contraction.<\/p>\n
This has left Mboweni, a former labour minister who\u2019s called for asset sales and an end to bailouts for state companies, in the strongest position he\u2019s been in since returning to the cabinet, Bloomberg said.<\/p>\n
\u201cHe is the winner,\u201d said Ralph Mathekga, an analyst and author of books on South African politics. \u201cTito Mboweni is on the rise. His case has been made more real.\u201d<\/p>\n
And the new economic reality confronting South Africa has also aided Ramaphosa in wresting control of decision-making from ANC officials loyal to former president Jacob Zuma, Bloomberg reported.<\/p>\n
\u201cThe positive side of this crisis is we can see how the government should actually work, without the day-in, day-out intervention by elements within the ANC,\u201d said Theo Venter, a political analyst at North-West University in Potchefstroom.<\/p>\n
There\u2019s little room to implement policies favoured by the communist party or the Congress of South African Trade Unions, the country\u2019s biggest labour group, such as inflation-beating pay rises for civil servants and a bigger role for the state in the economy.<\/p>\n
\u201cGovernment has to make hard choices,\u201d said Martin Kingston, the vice president of Business Unity South Africa, the nation\u2019s main business group, and chairman of Rothschild & Co\u2019s local unit.<\/p>\n
\u201cIt is going be very difficult to demonstrate largesse in this environment.\u201d<\/p>\n
Mboweni has spoken of his newfound strength. At a March 29 media briefing, he recounted how he had been told by Ramaphosa that the downgrade by Moody\u2019s Investors Service meant he could forge ahead with economic reforms and he had responded \u201challelujah.\u201d<\/p>\n
\u201cThe balance of power in the ANC-led government has shifted in favour of a \u2018triumvirate\u2019 consisting of president Cyril Ramaphosa, finance minister Tito Mboweni, and South African Reserve Bank governor Lesetja Kganyago,\u201d said Robert Besseling, executive director of political risk advisory firm EXX Africa.<\/p>\n
\u201cThe government will respond to the double shock of the coronavirus outbreak and the Moody\u2019s downgrade by making long-overdue structural reforms.\u201d<\/p>\n
The house of ANC<\/strong><\/p>\nAccording to Intellidex analyst Peter Attard Montalto, factions within the governing ANC are still at play, with some ministers moving a lot slower than others in implementing the necessary reforms needed to stimulate the economy.<\/p>\n
Notable voices within the party who have actively moved against president Ramphosa’s reform agenda have fallen silent.<\/p>\n
ANC secretary-general Ace Magashule, his deputy, Jessie Duarte, and Paul Mashatile have struggled during the crisis, and have failed to gain relevance. “Godongwana has not raised his head. Mabuza is AWOL,” Attard Montalto said.<\/p>\n
“We also watch Dr Zweli Mkhize in particular who is having an excellent crisis as health minister but has gone rogue somewhat \u2013 is spending an awful lot of time in KZN, is running his own completely independent media operation and we think is vying for upside in a more senior government role (maybe even deputy president) after 2022. He should be watched,” Attard Montalto said.<\/p>\n
And echoing media reports at the weekend, the analyst also noted the use of food parcels being used as political campaign tools, bearing in mind that municipal elections are coming in 2021.<\/p>\n
In terms of social unrest, while there have been pockets of unrest in townships around the country, there have been no centralised voices of discontent to lead riots or widespread protest.<\/p>\n
Criminality has emerged in cases of vandalism and looting, but Attard Montalto said as long as social grants are being paid, it’s difficult to forecast any eruption of unrest – however, the risk remains.<\/p>\n
Changes<\/strong><\/p>\nSouth Africa will need to wrestle its enormous budget deficit down, and implement a raft of growth-boosting structural reforms to avoid further deterioration, and it will have to do so from a much weaker starting point, Absa said.<\/p>\n
It noted that the current pandemic is a big distraction from the reform agenda, but there are signs that the government intends to \u2018not let a good crisis go to waste\u2019, essentially using the urgency of the crisis to implement policies that were previously impossible.<\/p>\n
\u201cFor example, the government has declined to provide any further bailout funding for loss-making South African Airways and SA Express, which essentially means that they will be liquidated, in our view,\u201d Absa said.<\/p>\n
It pointed to four reforms it sees as particularly critical over the next year to lifting business confidence, boosting growth and avoiding further credit rating downgrades.<\/p>\n
The first is securing electricity supply in a liberalised market. \u201cThe government is now awaiting concurrence from the regulator on its plans,\u201d Absa said.<\/p>\n
The second is securing regulatory certainty in the key mining sector, in part via an agreement on the \u2018once empowered, always empowered\u2019 standoff that is preventing agreement on the Mining Charter.<\/p>\n
The third is opening up the visa regime for skilled foreigners once the travel ban is lifted. The fourth is the auction of the broadband spectrum, Absa said.<\/p>\n
The Covid-19 pandemic could also profoundly shift the thinking of both the government and the private sector in a number of important policy areas, including especially National Health
\nInsurance, it said.<\/p>\n
\u201cStill, it remains exceptionally difficult to see how this scheme, despite its moral and social merits, can be financed. So far, the crisis has not sparked any evolution in the governing alliance\u2019s thinking about labour market shibboleths, but reformers in the ANC must understand that increased labour market flexibility is key to job creation.<\/p>\n
\u201cPerhaps, moves towards this could be offset by a fresh look at basic universal income approach to social welfare, especially if firms lay off lots of workers and growth is slow to recover.<\/p>\n
\u201cThe proposal to top up social grants for the duration of the crisis could mark a step in this direction,\u201d Absa said.<\/p>\n
\nRead: The good, the bad and the ugly facing South Africa after lockdown<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"South Africa\u2019s fractious politics might conceivably benefit from the Covid-19 pandemic to the extent that the government\u2019s adroit management of the public health aspects of the crisis could boost the popularity of president Ramaphosa and his team of reformers, says Absa.<\/p>\n","protected":false},"author":10,"featured_media":388185,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[23],"tags":[29,26],"class_list":["post-391323","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-government","tag-absa","tag-headline"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/391323","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=391323"}],"version-history":[{"count":10,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/391323\/revisions"}],"predecessor-version":[{"id":391835,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/391323\/revisions\/391835"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/388185"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=391323"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=391323"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=391323"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}