- ANC conference postponement would be worst scenario, BLSA says.
- Downgrade to junk is certain, not probable, Mohale says.
South Africa’s main business group fears the country will be stuck in political limbo if infighting causes the ruling party’s elective conference in December not to go ahead.
The race to succeed President Jacob Zuma as leader of the African National Congress is widely seen as a head-to-head contest between his deputy, Cyril Ramaphosa, and Nkosazana Dlamini-Zuma, the leader’s ex-wife and former chairwoman of the African Union Commission. The battle has grown fractious and the ANC is working to resolve its internal differences to ensure the conference goes ahead as planned and avoid a repetition of previous splits that spawned three opposition parties, Treasurer-General Zweli Mkhize, who is also a candidate, said Oct. 10.
The task of uniting the ANC after the damage to the party’s image caused by Zuma’s scandal-ridden presidency is daunting. A bitter split in KwaZulu-Natal has effectively left the eastern province without a party leadership, and allies such as the Congress of South African Trade Unions and the Communist Party are openly calling for the president to go. The economy staged a weak recovery from the second recession in less than a decade in the three months through June 30, and business confidence is near the lowest in more than 30 years.
“What begins to worry us now is the congress not happening at all, because the branches are so disorganized,” Business Leadership South Africa Chief Executive Officer Bonang Mohale said in an interview in Johannesburg Monday. “I can’t think of a more of a worst-case scenario.” BLSA represents about 80 of the country’s biggest companies.
Concerns about policy and political uncertainty, along with weak domestic demand, weigh heavily on business and consumer confidence, deterring investment and job creation, the National Treasury said in its medium-term budget policy statement on Oct. 25. Taxpayer compliance is also deteriorating, it said, with allegations of corruption and mismanagement of state resources affecting collections.
BLSA members have pledged to implement anti-corruption measures such as protecting whistle blowers. “There’s the realization that government on its own is not going to take this country out of this morass,” Mohale said.
South Africa’s rand slid to the lowest in about a year after the Treasury almost halved its economic growth forecast for this year to 0.7 percent this year and said debt is predicted to rise. The deteriorating trajectory threatens to trigger a downgrade of the rand-denominated securities’ assessment to junk by S&P Global Ratings and Moody’s Investors Service. Fitch Ratings Ltd. already assesses the local-currency debt as sub-investment.
“The real example of how bad the medium-term budget policy statement has been is that we’ve now moved from a downgrade being probable, to a downgrade being certain,” Mohale said. “You wanted to give hope, and yet you don’t come up with an emergency economic plan,” he said, referring to Finance Minister Malusi Gigaba.
Published on Bloomberg (31 October 2017)