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Cape Town - The recent stark warnings of the International Monetary Fund (IMF) over the urgent need for structural change to the South African economy come at a time when the clock is ticking on making substantive reforms to prevent a ratings downgrade.
From labour reforms, to regulatory resets to state-owned enterprise governance, South Africa seems locked into politically inspired inertia. The ANC has been unable to move on most of these issues – despite the commendable and very public intention of Finance Minister Pravin Gordhan.
With the ratings agencies’ clock ticking, the root cause of this stagnation is largely political. The structure of the ANC alliance and increasingly fragmented and competitive politics have made the governing party insecure. So insecure in fact, that policy paralysis is now the order of the day.
The fear of further damaging the alliance – under increasing electoral pressure – now prevents the Gordhan faction from effecting real implementation.
Within this climate of a political stalemate something has to give or else we stare down the junk downgrade together, along with the resultant economic hardship. Only real reforms – which might be politically divisive within elements of the alliance - can offset this danger.
In a strange way the August 3 elections provide an important opportunity to break this impasse. And, in an ironic twist, Gordhan might well be able to take advantage of a stronger DA.
For Gordhan and the ANC any election – even the local one – is a chance to refresh a mandate. It’s a signal to government to either continue what they are doing or to change direction.
Should the DA do well in the election, Gordhan might rue the loss of ANC support, but could be encouraged by an electorate calling for economic policy and delivery change. Gordhan’s first prize, of course, would come from a broad mandate from within the ANC, but currently this is unlikely.
After all, in most of the key structural areas needed to stave off a downgrade and make us grow again, the DA would ideologically be supportive of the Gordhan view.
The DA would be quick to review the labour relations regulatory environment. It would surely want to reconstitute the boards (and much of the operational malaise of the SOE sector) and it would want to reduce the minefield of regulatory bottlenecks introduced in recent years.
Clearly, the reverse is true should the DA stagnate while the EFF spurts. A populist surge would severely hurt Gordhan as the ANC may lurch to the left in an effort to stave off the further erosion of its support come 2019.
To the credit of the major political parties, this local government election has not just been about President Jacob Zuma. Both the DA and EFF have attempted to localise their campaign beyond the scope of national politics.
Despite this, broader national issues of problematic leadership, corruption and maladministration all remain core-underlying factors in addition to potholes, housing and general municipal inefficiencies.
Still, the core political outcome of the election is more likely to impact on the economy. Few South African, perhaps, realise the nexus between just how the ruling party will interpret its mandate following the vote and our resultant standing as either a "junk" or investor friendly economy.
The key issue is whether DA growth leads to an easier path to market and business friendly economic reform or whether EFF success means a shift to populism and an increasing state interference and resultant cronyism. Either way, the ANC of old can be substantially impacted should either scenario occur.
And, with time running out for Gordhan and his team to effect concrete change before December, a clear mandate from the electorate is needed. A strong ANC vote is more likely to shore up Zuma’s faction of the ANC rather than assist Gordhan. It will be seen as a reaffirmation of an existing status quo without any clear indication to bolster the reformers.
It is, therefore, apparent that this local election has substantial ramifications for the economy and policy making in future. It’s so much more than potholes.
And, with the chances of more coalitions in metros and local authorities than ever before, this could just be the kick-start South Africa needs for political realignment and policy change.
Given the DA’s support for broad swathes of the NDP and Gordhan-style reform, this is a chance to pry open the old constraints of South African politics. And it’s a chance to signal to the rating agencies that an increasing body of South Africans are willing to shift their previous political allegiances.
Gordhan will no doubt be putting his cross next to the ANC, but any DA success would have its benefits too.
* * Daniel Silke is director of the Political Futures Consultancy and is a noted keynote speaker and commentator. Views expressed are his own. Follow him on Twitter at @DanielSilke or visit his website.
