MOODY'S CREDIT RATING AGENCY is warning against overreaction and over-exaggeration of South Africa's political and economic situation. But it has confirmed that an upgrade isn't imminent and that it's watching policy and leadership moves very closely. While rating agency Fitch IBCA has just downgraded SA's outlook from positive to stable, the country's business confidence index has plummeted.
Many economists and business leaders believe that's understandable in the current global economic climate but are concerned that politics in SA has exacerbated an already difficult situation. The ANC is battling to reinstate discipline after a bruising leadership struggle that left cadres fighting and took the public service's eye off the delivery ball.
Question marks around ANC party president Jacob Zuma's credibility don't help and don't add weight to his attempts to speak with the measure of authority the party needs. Related to the internal party power struggles are sideshows, such as the allegations by Constitutional Court judges against Cape Judge President John Hlophe, who allegedly tried to steer court members into Zuma-friendly decisions in cases related to his corruption trial. That isn't only framed by a push to reposition Government policy (especially economic policy), which hasn't had the promised effect on addressing poverty.
It's coincided with power shortages brought on by poor Government planning as well as the inflationary consequences of a depressing global economic downturn. Because there is no opposition party to really threaten the ANC's power base in next year's national election, the country appears to be stuck with the compounding effects and consequences of a very powerful ruling party that's at best in transition and at worst at sea. Despite repeated claims by Government that there are no leadership, factional or delivery crises, South Africans are begging to differ.
For example, it's now clear that the ANC is losing support in areas such as Matatiele and Moutse, where residents are furious about demarcation decisions. Khutsong is ungovernable and ANC officials aren't welcome there. Xenophobic violence was more anti-Government than anti-foreigners. The big question is: What does all that actually mean for the country's political and economic stability?
Finweek asked six economically, socially and politically inclined South Africans what their take was:
Moeletsi Mbeki: Political economist
SA's stability doesn't depend on ANC
INTERNAL FEUDS affect the ANC, not the stability of the country. What drives SA's economy is the private sector, not the ANC. It's different in economies such as Zambia and Tanzania, where most of GDP is generated by public corporations. In SA the only key places the State is involved in are rail transport, telecoms and power generation. Those are also areas where the private sector could become far more significant players.
The first thing a new ANC government needs to do when it takes office after the 2009 election is make good with the two major players that ended apartheid and put the ANC in power in the first place: the poor masses who made the country ungovernable and the West, which imposed sanctions. Currently, the ANC isn't only failing to deliver to the poor masses, it's also failing to deliver to the West in terms of issues, such as President Robert Mugabe in Zimbabwe.
If that continues, there'll be a massive problem with the rand and insurrection, which we saw in the xenophobic violence. That was an anti-Government move. It just so happened that the poor foreigners were the scapegoats this time.
Prince Mashele: Institute for Security Studies
Paying for the pre-Polokwane battle
IT'S DIFFICULT NOT to come to the conclusion that SA's political stability is in jeopardy. There's a very scary culture emerging in the ANC that was mirrored in the recent violence against foreigners. Society is mirroring what's happening in the ANC. The ruling party has got to get out of the Polokwane trenches and reclaim the moral high ground. If the ANC becomes scattered, things will get much worse before they get better.
The problem is a leadership deficit. Jacob Zuma is seriously challenged on moral grounds. How do you separate Zuma from ANC Youth League Julius Malema's statements (he said the league was prepared to "kill" to ensure Zuma was made president). They belong to the same camp in the ANC, and the Youth League claims responsibility for Zuma beating Mbeki.
Zuma says the organisation can't harbour hooligans but he doesn't have the moral credibility to quell what's happening in the ANC. The environment is so politically polluted that anyone who has the moral authority is being trapped in the crossfire.
Azar Jammine: Econometrix chief economist
Speculators' paradise
MUCH PERSPECTIVE is being lost here. There's no doubt SA's politics is less stable now than it has been since 1994. Until a few months ago people were terrified of a Zuma presidency, but that's been appeased to a certain extent. Now there's a sense that at least next year, when a new government comes in, things will be better.
There's also real frustration among business people about the apparent paralysis in Cabinet and among many Government officials. All this does coincide with a deteriorating economic situation. However, overall the country's economy is still growing. It's still far better off than it was in the late Eighties or early Nineties. SA is a big economy. It's not Zimbabwe.
South Africans must also recognise the biggest correlation between SA and its economic growth isn't the internal politics of the ANC but what happens overseas. What's most important is the way foreign investors are feeling. If they're optimistic, they buy the rand. If not, they sell it. The rand is the world's most highly traded currency. It's a speculators' paradise. Keeping people such as Finance Minister Trevor Manuel or SA Reserve Bank Governor Tito Mboweni will be key for the new government to maintain continuity and confidence.
Ashwin Desai: University of KwaZulu-Natal
False flags
THE INSTABILITY of the country has been there all the time. The ANC grouped as one in the Union Buildings was a veneer of stability. It was a false flag. Now the ANC is saying the party isn't divided. Again, it's icing on a cake that's rotten. The ANC should be openly and publicly presenting the ideological battles raging within it. That way the people using the situation for their own gain would be exposed.
Those issues are replete in all ruling parties and the ANC must learn that. The battle between Obama and Clinton makes the Zuma/Mbeki battle look like a kindergarten squabble. But it's not about leadership. The three wise men leading the tripartite alliance aren't going to save us from the apocalypse. We need to stop debating leadership issues and start questioning how to get our democracy to meet people's aspirations. How do we get them involved in their own lives instead of the top dictating to them about what they need?
And in many areas people are starting to show Government what democracy is and how it works and taking a stand against it, even barring ANC leaders from their communities. We must nurture that. Zuma's people may not have the easy ride they may think they're going to have.
Rudi Dicks: Cosatu economist and labour policy co-ordinator
More cohesive approach
IT'S IMPORTANT TO disaggregate between the political, economic and social aspects. At a political level there's a level of stability that allows for a more open and robust debate on various policy areas. Remember the ANC has never been homogenous and remains contested terrain at all levels - thus divergence is an important characteristic of our political landscape and shouldn't be viewed as instability.
However, at an economic and social level there continues to be a high level of instability: the inability to deliver on jobs, the inability to significantly reduce poverty or deliver basic services, among others, will continue to create instability. The crisis of delivery will continue post 2009 elections should the ruling party fail to make significant policy interventions that would substantially turn the tide on unemployment and poverty.
Chris Hart: Chief economist Investment Solutions
Skills and ability
WHAT CONCERNS ME is the trend to push to see where the Constitution's limits are (instead of going all out to protect the Constitution). Think of the issues around NPA boss Vusi Pikoli, the judicial reform Bills and the media Bill. There's also a lot of magic wand stuff with the election coming up. A lot of policies are drifting at the moment.
While the inflation targeting policy could cause a crisis in confidence, I think it will hold in the end. The policy to push investment up to 25% of GDP is a good one. But, due to the huge gap between savings and the resources needed to meet capital projects, something's going to break. From a policy perspective we have to boost the savings rate so that we can sustain capital expenditure. I have a feeling that's not going to happen.
The public service's overall decline in efficiency is one of the biggest challenges facing Government. Mission statements reflect more magic wand stuff, not what's really happening. That's because the State is finding it increasingly difficult to attract skills and ability. Why? Because skills and ability aren't what it takes to get ahead in the public service.