South Africas finance minister Enoch Godongwana is back from a relatively fruitful week of meetings with World Bank president David Malpass, US Treasury Secretary Janet Yellen, and other key figures attending the G20 Spring meetings.
The view from within SA Treasury circles is that the discussions centred positively but with caution on SAs economic prospects, the fight against corruption and the aftermath of state capture, facilitation of “innovative” finance instruments, energy sector reforms, the energy sector transition to cleaner energy following the recent $8.5bn in assistance pledged by several countries, and efforts to improve the overall business climate in SA, among other matters.
The meetings and their outcomes both cordial – are a plus both for the minister and by extended consequence for SA business and investors and could signal some future positive spinoffs.
But this should not be misconstrued as part of a change of government sentiment or its discarding of established economically hard-line doctrines or any movement in that direction.
It also does not, at this stage, mitigate the uphill battle Godongwana still faces with his ANC colleagues if he wishes to pursue economic policy and structural reforms.
We believe he fully appreciates this necessity but is treading very carefully within party structures to avoid conflict or efforts to block him.
As his predecessor found out, and as he probably knows, he will face plenty of intransigence and resistance from a mix of uninterested/incompetent fellow cabinet ministers, ideological resistance from the ANCs formal alliance partners, and ideological and radical economic transformation (RET) baggage and resistance in the ANCs powerful national executive committee.
Any efforts in this regard will also have to be cognisant of the fact that the ANC holds its elective national conference in December at which President Cyril Ramaphosa hopes to be re-elected as ANC president.
Many ministers pin their hopes for keeping their jobs on such an outcome, among other dynamics at play.
While Godongwana may himself be more reform inclined, it also wont help him that he lacks a strong and decisive president to back him and help him negotiate these minefields.
Apart from the obvious potential politics he may possibly also have to factor in a past scandal that still arguably hangs somewhat over his head, which could be revived if he makes enemies within the ANC.
He has never acknowledged or accepted responsibility for the company Canyon Springs Investments 12, which he chaired and jointly owned with his wife, defrauding clothing factory workers of R100-million of their pension fund money and while two other co-owners were held accountable, the issue has never been fully resolved.
While Godongwanas alleged personal activities in the latter regard seem to be mostly overlooked by public commentators in favour of a hoped-for improvement on the economic recovery, reform and growth front, it is the overall intransigence of the ANC and the government that is stalling meaningful progress.
The government also remains dangerously at odds with the overwhelming public concern as shown in several polls – for material bread and butter issues being addressed rather than the imposition of discredited ideological predilections by a party out of touch with the requirements of facilitating a progressive business environment that will be attractive to both domestic and foreign investors.
Both South Africas Premier Political Risk Intelligence & Analysis Service since 1986 | Confidential | 25 April 2022 Vol. 33 No. 11 2 Godongwana and Derek Hanekom, a former tourism minister and one of President Cyril Ramaphosas foreign investment envoys, last month acknowledged in an interview with Daily Maverick that SA was hard to sell to overseas investors.
This is the kind of background, among many other negative issues, that inform developments such as e.g. Sibanye-Stillwater CEO Neal Fronemans recent categorising of SA as a failed state.
His companys just-released 2021 annual report also warned that SA business will need to step up its role in place of the governments slow progress with reforms which wont drive sufficient economic growth and reduce social discontent.
This is a sentiment widely shared in SA business and other non-government quarters.
Also, on the more negative side, some of the gist of this also diplomatically found its way into the ministers discussions at the G20 meetings.
So, while Godongwana may have had some positive discussions in Washington last week, the longer-term outlook for positive reform measures that will attract investment, remains on the bleak side.
Other Issues This Week Tough wage negotiations on two fronts may add to pressures While there are strikes and/or wage negotiations currently underway in several sectors, especially two developments stand out for their significance in the political economy sphere.
One is the almost 50-day strike at platinum and gold producer Sibanye-Stillwaters local gold mining operations.
Sibanye-Stillwater last week raised its offer to 30 000 striking workers to R850 a month for three years for the lowest-paid workers, up from the previous R700, plus other adjustments.
The two major trade unions involved, the Association of Mineworkers and Construction Union (AMCU) and the COSATU-affiliated National Union of Mineworkers (NUM), declared a strike on March 9 while demanding a R1 000 a month increase.
The two unions will meet with Sibanye management officials on Tuesday (tomorrow) to table their consolidated response to the miners final settlement offer.
The other development concerns the imminent public sector wage negotiations which officials believe will be very tough.
On the one hand the Treasury faces budgetary constraints and a commitment to cut down on spending, as well as demands for additional funding from distressed state-owned companies (SOEs), and calls for permanent increases in spending that exceed available resources, according to Treasury official in the Budget Office, Marumo Maake, as reported in the media.
On the other hand, public sector unions are expected to try and exploit the larger than expected tax windfall due to high commodity prices, while also adopting a tough line on the back of losing out on the final year increases of a three-year wage deal last year when government reneged, a move that subsequently was upheld by the high court.
The unions wont forgive that one easily.
A worsening strike at Sibanye, or a new public sector strike, will both incur serious further socioeconomic and consequential political impacts.
This could come at a time when the governments finances are already balanced precariously, and any new added pressures could trigger a host of political and economic consequences.
Rising Covid cases, KZN flood disaster aftermath may tempt government to reinstate “justified” tougher regulations again – Government has already upgraded KwaZulu-Natals provincial state of disaster to a national state of disaster (NSOD) following massive flood damage and deaths in that province.
However, on the back of data showing that the National Institute for Communicable Diseases (NICD) is reporting significantly higher numbers of new Covid-19 infections and related deaths, there is some pressure in government circles to use the NSOD to return to instituting tougher social control regulations of the kind seen during the Covid-19 lockdowns and managed by the secretive National Coronavirus Command Council (NCCC) and its de facto chair COGTA Minister Nkosazana Dlamini-Zuma.
This comes just as the store of conventional wisdom built up during the pandemic on best-practice social preventative measures has been undergoing something of a recent paradigm shift abroad but also in SA in some quarters.
Nonetheless, the reinstatement of a NSOD follows governments reluctant parting with the previous NSOD and its tough measures that hampered education, business and especially tourism and the hospitality and entertainment sectors. However, there is little need for a NSOD being declared in order to re-introduce such measures.
After ending the previous NSOD, government quickly announced transitionary interim regulations to keep its controlling hand on the pandemic and society while waiting for the finalisation this month of tough new regulations under the National Health Act that the health minister can arbitrarily apply.
ANC continues pursuing power centralisation recent examples Much of the above discussed government decision to reinstate the national state of disaster (NSOD) should be read together with the ANCs unwavering drive to secure maximum centralisation of power and decisionmaking in every key political sphere from centrally controlling local government to basic education.
This was the case with placing so much excessive power in the hands of COGTA Minister Nkosazana Dlamini-Zuma and a few other ministers running the National Coronavirus Command Council (NCCC) without Parliamentary oversight; shifting the NSOD regulations into the Health Act that has a built-in provision to accommodate such; Dlamini-Zumas rather devious activation under cover of the pandemic lockdown of the District Development Model (DDM) that centralises much of local government activities and key decision-making at the national level in the name of advancing the developmental state; escalated advancement of the National Health Insurance (NHI) during the pandemic that will centralise substantial control over the entire health sector in the hands of the health minister and his senior officials; and the Basic Education Laws Amendment Bill of 2022 which centralises power in respect of key school management issues in the hands of a handful of bureaucrats at the expense of school governing bodies, to name but a few recent such developments.
New Covid infections wave, restrictions could hit SA next month with further dire consequences On the pandemic front, SA experts and authorities expect that a new wave of infections is likely to hit SA during May.
SA has recorded a sharp increase in Covid cases with new data showing that the National Institute for Communicable Diseases (NICD) is reporting significantly higher numbers of new Covid-19 infections and related deaths.
Earlier government had been slowing down its Covid-19 vaccination campaign and shut down many inoculation stations despite the fact that the Department of Health acknowledges that the number of people vaccinated remains far below its target.
Earlier this month, Health Minister Joe Phaahla said the fate of face masks and PRC tests after the 30-day transition period would be contained in the final health regulations to be completed after April 16.
It appears there is some pressure that any new regulations, whether under the draconian National Disaster Management Act or the National Health Acts new regulations, should follow the guidelines of the previous month-to-month extensions of the NSOD.
If this indeed becomes the case, it will be a further setback to the recovery of the national economy and sectors that were particularly hard hit, such as tourism, travel, hospitality and entertainment could arguably again be in line for some of the worst impacts.
Of course, the liquor and tobacco industries also are never off the radar screen of some ministers in President Ramaphosas cabinet.
Overall political and economic outlook this week Much of what we have anticipated and flagged in the political sphere for this week going forward, is echoed in the near-term economic picture sketched by the Stellenbosch Universitys Bureau for Economic Research (BER) in its weekly newsletter.
According to the BER, the near-term economic picture has darkened since the release of the BERs previous Weekly Review. Not only did the February activity data disappoint expectations (see domestic section), but the devastating flooding in parts of the country and stage-four loadshedding means that pressure is building on Q2 GDP.
“The recent adverse events occurred while a labour strike in the gold mining sector has now dragged on for almost 50 days. Furthermore, there are early signs of a resurgence of Covid-19 in SA 4 with a rising incidence of virus fragments in wastewater.
“The positivity rate of tests has risen sharply over the past week with case numbers increasing rapidly (see chart). Fortunately, hospitalisation rates remain low, but are also edging up somewhat.
“In this Monday Briefing we also covered these aspects above with specific warnings of potential pressures within both the political and economic spheres.
“The precarious ongoing negative situation at Eskom in respect of electricity provision, remains a major concern for economic recovery and growth.
“In this regard the BER says the following: Another shock to Q2 GDP growth came from more intense rolling blackouts over the past week.
“A new record of 22 000MW of generation capacity unavailable last week (with a staggering 17 000MW of this being unplanned) and higher demand amid a cold weather spell, meant that Eskom had to escalate load-shedding to stage 4.
“Worryingly, in its assessment for the winter period, Eskom anticipates between 37 to 101 days of load-shedding, the latter in an extreme scenario.
“If it can limit unplanned breakdowns to below 12 500MW, it could avoid load-shedding.
To this we can add that in this regard, Eskom continues to be dogged by a host of unfortunate issues.
Its new management and board are progressing well with restructuring the entity, rooting out corruption and trying to improve ongoing maintenance.
However, external factors over which they have little or no control continue to add to power failures necessitating loadshedding.
In addition, Eskom still de facto answers to two cabinet ministers who are not on the same page, especially regarding the transition to cleaner energy and the role of the private sector.
Previous years political interference and criminal exploitation by the state capture regime under ANC control, has left a serious impact with systemic breakdown that are not easily corrected.
In this regard Eskom board member and head of Business Leadership SA (BLSA) Busisiwe Mavuso was quite correct in telling the Standing Committee on Public Accounts (SCOPA) that the Eskom board and CEO Andre de Ruyter should not be made scapegoats for the utilitys historic problems under ANC oversight.
She was then asked by SCOPA chair Mkuleko Hlengwa to leave the meeting a puzzling move by the IFP chairman who berated her for bringing the ANC into the affair when, according to him, she should do the work for which the ANC supposedly deployed her to the Eskom board.
Why Hlengwa would carry the can for the ANC is whats puzzling. Some have suggested that, coming from a party and background that is attached to traditional Zulu gender views, he felt insulted that a woman should have addressed the male chair and other committee members in such a combative manner.
Whatever it was, Hlengwa should rather than muzzling her, have seen an opportunity to address a fundamental issue underlying Eskoms many problems.
Meanwhile, the BER further writes: There was also bad, albeit not unexpected, news on the international economic front. Both the International Monetary Fund (IMF) and the World Bank published downwardly revised global growth forecasts in the past two weeks.
“This was largely due to the expected negative economic fallout of the war in Ukraine and countries limited fiscal space in the face of high inflation.
“Indeed, both institutions sharply increased their inflation forecasts and warned that sanctions on Russian oil and gas risk pushing up inflation even more.
“Even without such a further escalation in inflation, it seems clear that the US Federal Reserve (Fed) will embark on a more aggressive monetary tightening pace than previously thought.
“In fact, the market expectations of the first rate hike by the “European Central Bank (ECB) have also (again) been brought forward to earlier this year.
“In response, domestic traders are now also expecting more aggressive interest rate increases from the SA Reserve Bank. “Worries about global and SA growth amid prospects of aggressive monetary tightening in the US meant that the rand exchange rate came under pressure last week.”
All in all, the political and economic prognosis for SA looking ahead, looks rather stressed with indications that things could worsen before improving.
Some important economic data releases this week could add to this picture.
On Thursday, producer price inflation (PPI) data for March will be released, followed on Friday by data for private sector credit extension in March, as well as the release of the monthly budget balance figures.
* The writer of this article Stef Terblanche is a Political Analyst & Editor
*The Bulrushes does not necessarily share his views
