South Africa’s new president, Cyril Ramaphosa, has just crossed 100 days in office with increasing signs that his honeymoon period is already over. The economic realities are hitting home. And the accompanying impatience which seemed suspended since he took over in February is reemerging.
Ramaphosa’s tenure came with renewed hopes about the future of the country’s economy. His state of the nation address, followed by the national budget, raised optimism that the economy would soon rebound. This followed President Jacob Zuma’s rule which wrecked the economy through a series of corruption scandals and destructive economic decisions.
Given the depths to which Zuma had taken the country, it was easy for the Ramaphosa euphoria to emerge. A couple of speeches promising a “new dawn” did the trick. The people ululated and the markets cheered.
But it would seem that the honeymoon is over. Patience is waning and giving way to protests against long standing grievances. The failure by the ANC government to deliver basic services and endemic corruption is driving people to the streets.
Many celebrated the decision by one of the top three credit rating agencies to leave South Africa’s rating unchanged. What they missed was it’s long list of warnings.
I believe that this all adds up to the need to be extremely cautious about the country’s immediate future. The real test for Ramaphosa’s presidency is how he will respond to the immediate pressing needs. The people, markets and rating agencies will stand waiting to judge.
A closer reading of S&P’s decision
S&P downgraded South Africa’s sovereign rating to sub-investment grade towards the end of last year, warning that further downgrades were possible. The country’s economy was in a perilous state and faced the possibility of slipping deeper into sub-investment grade.
What’s been done, and not done
Ramaphosa’s government has largely focused on saving key institutions ravaged by the patronage of the Zuma era. This include the police and prosecuting agencies and state-owned enterprises.
There have been big changes in the management of key state-owned enterprises such as the power utility Eskom, regional airline SA Express, defence company Denel and transport and logistics enterprise Transnet.
Possible solutions
Ramaphosa has inherited a ruling party and government faced with a tricky overriding challenge. The ANC is getting increasingly pressured by its voter base to deal with poverty and inequality. And the noise coming from populist groups like the Economic Freedom Fighters (EFF) is piling up the pressure. Arguably, it is this dynamic which led to the adoption of the land expropriation without compensation resolution at the ANC conference in December last year.