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Political division retards economic policy

The year 2017 is set to be a battle not only between political heavyweights but between those clamouring for action rather than just mere politicking, says Daniel Silke.

With S&P’s judgment late on Friday last week, the rating agencies have completed a year of stark warning for South Africa. There was just enough wiggle room in the detail of the existing ratings to allow for a period in which the country would understand – in no uncertain terms – that the agencies will act if we don’t. And there’s the rub.

Clearly, we know what to do – but political constraints keep us from implementing. We’ve been through this all before with the National Development Plan and assorted economic roadmaps, most of which end up gathering dust.

For the sake of our economy, political risk needs to be taken. While extraneous issues such as commodity prices and a more stable power supply might help us into some sort of limited recovery over the next year, it’s really all about policy.

Can we make our regulatory and governance environment attractive to both domestic and foreign investors? Can our labour unions fully embrace the urgency of a compact with the state and business? Can government lift its heavy hand of intervention and seemingly endless desire to lead the market? Are our state-owned enterprises and related institutions efficient enough, transparent enough and competitive enough to perform?

And finally, can the ANC in its current form manage this process expertly, prudently and without recourse to the slippery slope towards more graft and cronyism? When you look at the sheer size, complexity and track-record-to-date of each of these questions, one would argue that there is a mountain to climb.

The environment for policy making in South Africa is the real problem. Clearly, flat-lined growth and record unemployment is sufficient to suggest that the status quo cannot be maintained. Similarly, the plight of SOEs destabilises and demoralises. And, extreme factionalism within the governing party is a tightening noose around everyone’s neck – sucking out all policy-making oxygen in favour of a sterile, narrowly introspective and combative regime unable to take any risk whatsoever.

The last year has commendably seen Pravin Gordhan, several cabinet ministers and other Treasury officials make enough noise about the need to change. This noise was just effective enough in the stay of execution from Moody’s, Fitch and S&P. But noise is all that has saved us so far. The reality of structural policy changes to improve the economy and thereby tackle unemployment and inequality has not been forthcoming.

And by electing to keep President Jacob Zuma and his supporters in place – at least until the ANC’s elective conference at the end of 2017 - it’s hard to see the present regime taking any great policy risks. In fact, with a deepening divide in the governing party and with the looming ANC leadership battles, this is the worst possible environment in which to exact critical policy shifts.

Any political party needs a sense of ideological cohesion. In South Africa’s case, with extreme threats to growth and future downgrades, this becomes even more critical. But in the ANC, it could not be more scarce.

The ‘broad church’ has served the ANC well during better periods of economic growth. It was able to compromise between those closer to business and those seeking social redress. But as the economic screws tighten, so the party needs to move more boldly. The nature of the alliance and the grand coalitions upon which it is based now make this an impediment to policy change and eventual implementation.

Hamstrung by its component elements - from pro-business to socialist to communist to Chinese statist among a myriad of others – it is just stymied by itself. And when you add a year of internal leadership wrangling and contestation for power, you add another layer of complexity in being able to make decisions. That is precisely why the NEC’s decision to support Zuma can have dire consequences on the ability to make those structural policy changes.

Simply put, as there now seems a stalemate over which faction wields power and with that differing degrees of accountability and transparency, who will initiate policy change? With Zuma fighting for his political life - probably in court for most of the year – can anyone rise above that debilitating factor? And if they do, what will their political future be?

To act on our economy, we need bold action. The country requires a strong leader with an equally strong mandate from his own party – and preferably enough credibility to gain respect from the opposition as well.

Divisive and factionalised politics occurring alongside the incremental electoral decline of the ANC makes this tough to accomplish – at least until the 2018 period. That means South Africa runs the risk of losing a critical year. With no wiggle room left for the ratings agencies to keep warning us, it’s the ultimate year of living dangerously.

This is the year in which the ideological straightjacket that has hobbled the ANC’s economic policy needs freeing. But with the political masters in complete disarray and an ongoing battle for access to resources and the benefits of crony capitalism and rent-seeking, the signs are not positive.

The ANC now requires the most political determination in bold leadership since taking power in 1994. It is always possible that such a leader can rise to the occasion – but for the most part in December 2016, they seem to be still in hiding.

The next nine months will see us facing some more ratings cliff-hangers. The current state of paralysis and inability to implement is untenable. 2017 is therefore set to be a battle not only between political heavyweights but between those clamouring for action rather than just mere politicking.

* 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.

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