Economics in South Africa – the art of the near impossible

Cape Town - It is a far cry from the evening of March 30, 2017 when then President Jacob Zuma wielded an axe in the “Night of the Long Knives”, when he sacked 10 cabinet ministers, including the internationally respected Pravin Gordhan, and appointed the more compliant Malusi Gigaba as South Africa’s fifth finance minister.

In contrast, Ramaphosa Cabinet’s reshuffle on August 5 was a damp squib, although 10 ministerial jobs changed hands.

At best, it was a credit to the president’s diversity agenda that six of the new ministers are women.

This was a few days prior to the country observing Women’s Day and during 2021 as the Year of Charlotte Mannya Maxeke, the celebrated women’s rights activist born 150 years ago.

“Sacking”, it seems, does not feature in the lexicon of Cyril Ramaphosa’s polity.

That the two defining cabinet portfolios of the day – the ministers of finance and health – were changed on the spurious grounds that they were “requested” speaks volumes of the president’s ruling style.

The one request, apparently a “long-standing one”, was on the basis that erstwhile Finance Minister Tito Mboweni wanted to return to the private sector, and the other by Health Minister Zwelini Mkhize was apparently “to bring certainty and stability to this important portfolio”.

Never mind the fact that Mkhize is embroiled in the Digital Vibes scandal involving his ministry.

The ex-minister previously conceded that the Digital Vibes contract did involve irregularities.

“I have accepted a long-standing request by Minister Tito Mboweni to be excused from his position as Minister of Finance. Minister Mboweni has effectively and ably steered National Treasury through extremely difficult economic times, providing stability and instilling confidence,” Ramaphosa confirmed in his statement on his Cabinet reshuffle.

A further vacancy, he continued, “has arisen following the request I have received from Minister Zwelini Mkhize to allow him to step down as the Minister of Health in order to bring certainty and stability to this important portfolio”.

Although both have pledged their continued support to the president and his government, could the real reason for their resignations be the very “nice guy” presidential style of Ramaphosa, perceivably bereft of a steely backbone to deal with the factionalism and radical elements within the ruling ANC-SACP coalition?

After all, Mboweni was often the target of the radicals for his “neo-liberal” economic agenda.

For his 64-year-old successor, Enoch Godongwana, his president’s mandate is to “mobilise all available resources and capabilities to rebuild our economy and provide relief to those most vulnerable”.

Godongwana, a former prominent trade unionist and a deputy minister in two economic portfolios, seems to be a natural successor to Mboweni and a choice for continuity.

The SACP begrudgingly lauded Ramaphosa’s Cabinet reshuffle, but reverted to form when it castigated the failure of “the macroeconomic framework thus far followed in our country” and warned that “South Africa needs a macroeconomic framework that will eliminate the colonial features of our economy and drive industrialisation as a key tenet of national production development to create employment, eradicate poverty, and systematically eliminate inequality”.

As the thought leader behind the ANC’s economic transformation strategy, Godongwana, the seventh finance minister since democratic rule in 1994 and Ramaphosa’s third since he was elected in 2018, is perceived as the man to potentially close the policy gap between the ruling coalition and the state.

Not so for the extreme radical EFF, which directed its usual vitriol especially at Godongwana, calling his appointment “shocking” and warning that “he will continue with austerities and neo-liberal policy posture that holds South Africa’s developmental objective ransom and serves capitalist interests”.

International and local agencies and investors are sanguine about the Cabinet reshuffle, and do not expect a change in direction in the economic and financial consolidation policy from the new minister.

“It’s pretty clear,” explains Jan Friederich, senior director: sovereign ratings and head of Middle East and Africa sovereign ratings at Fitch Ratings, “that this is not a reshuffle like the one in late 2015, when Nhanhla Nene left his post as finance minister or in 2017, when Pravin Gordhan’s term as finance minister ended. Personnel changes from our perspective only matter if they do signal a change in the direction of policy and we do not believe this will be the case at present. By contrast, we considered the departure of Mr Gordhan in 2017 sufficiently important as a signal of policy intention to downgrade South Africa’s rating.”

Although they come from different backgrounds, Friederich contends that “the out-going and in-coming finance ministers clearly understand the pressures from high debt and the importance of safeguarding the credibility of the South African Reserve Bank. If there are differences, they are more likely to be about process than on the big lines of fiscal policy.”

For Friederich, the main challenges for South Africa’s current below-investment-grade long-term foreign-currency issuer default rating of BB- with a negative outlook are debt stabilisation and the very low-trend gross domestic product growth, amplified by the extremely high level of inequality.

“There has recently been some progress due to faster-than-expected revenue growth, and while wage agreements were higher than budgeted, they were lower than we had anticipated, and the social unrest and violence and the pandemic triggered additional expenditure. But raising trend growth, which would also make debt stabilisation much simpler, will remain very different,” he added.

Whether it is Enoch the old party apparatchik or the new finance minister that prevails, only time will tell!

Politics may be the art of the possible, but in South Africa, economics over the past two decades has proved to be the art of the near impossible.

Parker is an economist and writer based in London.

Cape Times