How #StateCaptureReport will shape SA's economic future

Cape Town – The political dynamic in the ANC is not so much moving away from tenderpreneurship and patronage as it is trying to find ways of doing these things more efficiently and quietly, said Peter Attard Montalto, emerging market economist of Nomura. 

In a company note, following Wednesday’s release of former Public Protector Thuli Madonsela’s report on state capture, Montalto was of the view that markets are likely to rally strongly on any news that may look like President Jacob Zuma could exit his presidency earlier than anticipated. 

READ: Rand races to under R13.40/$ on state capture report news

“In our view this overplays the role of Jacob Zuma in stopping reform in South Africa and over-estimates the change that will come,” he said, but pointed out that South African assets can nevertheless rally strongly on cabinet resignations, protests and calls for resignation and the “actual event itself”. 

Montalto, who is currently in South Africa, said he has already started to sense a fracturing of support within the ANC’s “tenderpreneur faction”, which includes Zuma, ministers in his fold and the so-called premier league, consisting of premiers Ace Magashule (Free State) Supra Mahumapelo (North West) and David Mabuza (Mpumalanga). 

But it is wrong to think that power inside the ANC centrally is transferring to an “anti-rent-extraction faction”, Montalto opined, and added that there is a serious risk that the status quo may remain. 

Although the Public Protector’s report will have a major effect on the ANC, people should not overplay its impact on the 2019 national elections. “There are still too many reactions and moves from the ANC that can allow it to hang on to power. The same is true still of Jacob Zuma – in the short term at least,” Montalto said. 

He emphasised that people often underestimate how deeply “patronage is built” into the ANC. “We are likely to see major leadership changes sooner or later, but the situation itself may well remain unaltered.” 

READ: Why patronage and state capture spell trouble for SA 

Montalto is also of the view that the state capture report may move the ANC to host an “economic Codesa” to move South Africa’s economy “beyond state capture”. 

“We think such a format would be very likely made up of big business, which is opposed to lowering barriers to entry, big labour, which in turn is against labour market reform, and big politics, made up of the status quo in the ANC.” 

According to Montalto, South Africa now needs proper leadership as opposed consultation. “This has not happened since President (Thabo) Mbeki. Let’s see if it can appear now.” 

The end-November meeting of the ANC’s National Executive Committee (NEC), as well as possible legal court cases in the aftermath of the state capture report should be closely watched, Montalto said. 

There may also be new pressure on Zuma and his faction and there could be cabinet resignations from Cosatu and SACP aligned cabinet members specifically. 

Des van Rooyen, Minister of Cooperative Governance and Traditional Affairs, and Mineral Resources Minister Mosebenzi Zwane, who were both implicated in the report, may also be dismissed, Montalto said. 

“The story is set to continue for some time. There will be no fast resolution in our view.”