SOUTH AFRICA: THE ECONOMIC COST OF RAMAPHOSA’S POLITICAL SURVIVAL
South Africa’s reform-minded and pro-business president has consolidated his support over the leadership of his party, which mostly remains averse to his policies. To avoid impeachment and assure a second term, President Ramaphosa has made political alliances with both party stalwarts accused of mismanagement and pursuing controversial policies, and emerging political powerbrokers who may choose to withdraw their support at – or even before – the 2024 general elections. A cabinet reshuffle in early 2023 will shed further light on South Africa’s plans for the struggling power sector and to combat rampant corruption.
On 20 December, South Africa’s governing party, the African National Congress (ANC), ended its five-day elective national conference in which incumbent party and state President Cyril Ramaphosa was re-elected for a second term as ANC leader. The party conference started three days after its parliamentary lawmakers nearly unanimously voted to reject a judicial review panel’s report that recommended impeachment proceedings against the president. Ramaphosa has almost tripled his margin of support among ANC delegates from five years ago, while assuring himself of overt parliamentary support, and he becomes the party’s presumptive presidential candidate at the next national general election in 2024, as Pangea-Risk has consistently forecast (see SOUTH AFRICA: EMBATTLED PRESIDENT SURVIVES POLITICAL ATTACK, AT LEAST FOR NOW).
As we similarly projected, to avoid impeachment and assure re-election, President Ramaphosa has been forced into political alliances with ANC powerbrokers who will pose a challenge to his authority in coming years, as well as party leaders previously accused of corruption or mismanagement. Both Ramaphosa and Mkhize’s supporters are reported to have offered key posts to other powerful leaders in deals struck just ahead of delegates casting their ballots at the conference. Both sides have denied accusations of vote-buying. The most immediate implication affects promised reform of the power sector and proposed restructuring of the state power utility. Even while the economic outlook for South Africa has improved in 2022, the country is facing its worst electricity cuts since power rationing started almost 15 years ago. Unless Ramaphosa can quickly leverage his newfound political capital to resolve such pressing concerns, the ANC is less likely to win a confident majority in the 2024 elections.
PANGEA-RISK assesses the outcome of the highly anticipated ANC elective congress this month, examines the prospect of a cabinet reshuffle in coming weeks or months, and projects the political and economic outlook into 2023 and towards the 2024 general elections.
Ramaphosa makes gains at ANC congress
At the ANC party national conference, President Ramaphosa secured the support of 56.6 percent of some 4,426 voting delegates, which is three times the margin he won at the previous conference in 2017. Nevertheless, his only challenger, former health minister Zweli Mkhize, gained more support from delegates than initially anticipated, thus forcing Ramaphosa into political alliances with some powerbrokers who may threaten his authority over both the party and the government in coming years. Even while Ramaphosa comes out of the latest party conference politically stronger than five years ago, he has also been weakened by both his efforts to avoid impeachment or resignation over the so-called Phala Phala “cattle gate” scandal and continued fragmentation of the ANC.
Beyond securing re-election for himself as party president, Ramaphosa’s supporters also secured several of the “Top Seven” leadership positions in the party’s executive. These included Minister of Mineral Resources and Energy Gwede Mantashe, who was re-elected as party national chairperson, and Minister of Transport Fikile Mbalula, who becomes the ANC’s new secretary general. Both Mantashe and Mbalula are staunch Ramaphosa political allies, although they have been widely criticised for controversial policies in their respective ministerial portfolios. Mantashe remains steadfastly committed to burning coal in South Africa’s power stations, while Mbalula has overseen the collapse of the country’s transport and logistics sector. Ramaphosa’s faction was further boosted by the election of allies Gwen Ramokgopa as party treasurer general, and Maropene Ramokgopa (unrelated) as ANC second deputy secretary general. Consolidation of these party leadership positions will be crucial as the ANC is effectively financially bankrupt and faces a massive drop in membership.
However, Ramaphosa’s supporters were unable to ensure a clean sweep of the “Top Seven” positions in the party leadership, as former environment minister Nomvula Mokonyane was narrowly elected as ANC first deputy secretary general. Although Mokonyane’s authority will be reined in by both Mbalula and Maropene Ramokgopa, she is a prominent leader of the rival so-called Radical Economic Transformation (RET) faction and has been accused of corruption under the administration of previous president Jacob Zuma, with whom the RET is aligned. Mokonyane’s election is a minor win for the RET and Zuma faction, even though their extensive support base in the party was indicated by the 43 percent of delegates who voted for RET candidate Mkhize against Ramaphosa in the ballot for party president.
Even so, no leader from KwaZulu-Natal, the political heartland of Zuma, was elected to any of the ANC’s “Top Seven” posts, in the latest sign of the former president’s and the region’s declining influence in the party. Zuma was sentenced for contempt of court last year after defying an order to appear before a judge-led inquiry that investigated corruption during his presidency. He has also been charged with corruption linked to a multi-billion-dollar arms deal that South Africa negotiated more than two decades ago. He has denied the charges. Zuma’s attempt to disrupt the national conference and undermine Ramaphosa’s authority backfired.
Perhaps most significantly, former Gauteng province premier Paul Mashatile, won a stunning power contest against both the Ramaphosa and Mkhize camps to win the party’s deputy presidency. Mashatile consolidated his influence in the ANC under the previous leadership where he held three of the top executive positions. Mashatile is expected to become South Africa’s deputy state president early next year, as the incumbent David Mabuza will probably be recalled after he failed to win re-election (let alone nomination) in the national conference. Mashatile has faced allegations of corruption previously in his career, although he seems to have restored his reputation and become a vocal supporter of reform in both the party and government. Even while some of his policy proposals resemble those advocated by Ramaphosa, Mashatile is unlikely to support the president and he will establish a powerful counterweight in the political balance of the ANC.
If Ramaphosa stumbles over Phala Phala or otherwise loses support, Mashatile will be quick to succeed the presidency – even before the 2024 elections, if the opportunity emerges. Ramaphosa is still at risk as he is being investigated by police, the tax office, and central bank over allegations of covering up a theft at his private farm and violations of exchange controls. Mashatile is currently not a parliamentary lawmaker, and according to the constitution, “the president must select the deputy president from among the members of the National Assembly.” He would therefore have to wait until May 2023 when the electoral regimen allows the amendment of public representatives’ lists. Another complication might be the apparent reluctance of current Deputy President Mabuza to resign, although he might be recalled by the party in such a scenario.
Looming cabinet reshuffle?
Paul Mashatile is unlikely to be the only change in South Africa’s cabinet in early 2023. Vocal opponents of Ramaphosa, including those who voted for his impeachment (or abstained) such as RET leaders Minister of Co-operative Governance and Traditional Affairs Nkosazana Dlamini-Zuma and Tourism Minister Lindiwe Sisulu, are expected to be removed from the cabinet. Deputy Public Enterprises Minister Phumulo Masualle, who stood on the Mkhize slate, may also be removed. Fikile Mbalula will lose his transport portfolio, since the party’s secretary-general post is a full-time position at the ANC. However, Gwede Mantashe may hold on to his portfolio at mines and energy, since the national chairperson can also hold a cabinet post and Mantashe has been a vocal proponent of energy policies in his ministry (see below).
Moreover, the position of minister of public service and administration is still vacant after former minister Ayanda Dlodlo was appointed as an executive director on the board of the World Bank earlier this year. Transport and Public Service and Administration are two key departments that cannot sit vacant for long. This was demonstrated for the latter in recent months when public servants embarked on – and continue to participate in – nationwide strikes, pushing back against the government’s unilateral 3 percent wage hike (see SOUTH AFRICA: IMPROVED FISCAL POSITION DESPITE TRANSPORT STRIKE AND TERROR ALERT). This political pressure suggests that a cabinet reshuffle may be imminent, perhaps to be announced in January 2023. Any cabinet reshuffle would probably happen before February’s State of the Nation Address.
Nevertheless, Ramaphosa may find it difficult to act without support from the ANC’s national executive committee (NEC), which is its top decision-making body between national conferences. The governing party, unprecedentedly, adjourned its national conference until 5 January 2023 without confirming the composition of the NEC. An overwhelming number of NEC candidates going into the national conference were opposed to Ramaphosa. Split votes and tight margins indicate that Ramaphosa might not be able to increase his support base from his current 60 percent of the 80 NEC members. The NEC may resist Ramaphosa’s plans to downsize the cabinet and appoint more loyalists as ministers. For example, Ramaphosa allies who did not gain ANC leadership positions, such as Eastern Cape Premier Oscar Mabuyane, would need to be rewarded. Such patronage may conflict with Ramaphosa’s expressed intention to downscale the government and cabinet, as he stated at the beginning of his first term as state president in February 2018.
The ANC national conference was also adjourned without adopting policy commission reports and resolutions. Ramaphosa in his closing address to the conference indicated that the ANC in his second term would focus on energy and water security, as well as adoption of the National Health Insurance (NHI) scheme, accelerated spending on infrastructure, tax rebates and private sector compacts, and a focus on rural and township economic development. Such policy proposals will only become clearer by 8 January when the party provides a statement that traditionally sets the ANC’s policy priorities for the year. The most important policy indicator will focus on the struggling power sector.
Power sector becomes political ball game
On 14 December, Eskom confirmed that André de Ruyter had resigned as CEO of the state power utility, amid a worsening power supply crisis and fragile electricity grid. His resignation follows an attack on Eskom the previous week by Mineral Resources and Energy Minister Gwede Mantashe, who said the power utility was attempting to overthrow the government by failing to end load shedding, which first started 15 years ago. Mantashe said Eskom was “actively agitating for the overthrow of the state” with continued implementation of load shedding. Neither Public Enterprises Minister Pravin Gordhan nor President Ramaphosa defended de Ruyter or Eskom, indicating that de Ruyter had lost his political support. The Black Business Council and the National Union of Metalworkers have also called for his resignation in the past.
Multiple sources report that Ramaphosa greenlighted Mantashe’s comments about Eskom that would force out de Ruyter in a trade-off for the latter’s support for the president in the impeachment vote on 13 December. Mantashe has been one of Ramaphosa’s most vocal supporters in recent months and his support is likely to have been tied to a promise to transfer the state power utility to his oversight. The ANC’s economic transformation commission has reportedly agreed to shift oversight of Eskom from the Department of Public Enterprises to the Department of Mineral Resources, which is headed by Mantashe. This shift would refocus Eskom’s strategy on coal, rather than renewables – a policy proposal that has been widely discredited by scientists and power sector experts.
Another focus area for Mantashe would be enhancing security at power stations, which remain at risk of sabotage. The South African National Defence Force (SANDF) has recently been deployed to protect at least four Eskom power stations to prevent a spree of theft and sabotage at the utility. The South African Reserve Bank recently reported that electricity outages were ongoing somewhere in South Africa almost half of the time during the third quarter of 2022. The central bank said that “load shedding did have a statistically significant negative impact on total real GDP growth and on the subsectors”.
President Cyril Ramaphosa has confidently secured another term as president of the ruling African National Congress (ANC) in the party’s elective conference in late 2022. This outcome supports policy continuity, as Ramaphosa’s administration continues to prioritise political and economic reforms. At the 2024 general elections, the ANC may lose its governing majority and be forced into coalitions with other parties for the first time in 20 years. In the meantime, legislative changes will likely continue to focus on anti-corruption measures and the transformation of the energy sector. The first half of 2022 brought in windfall tax revenues due to high global commodity prices, allowing the government to provide bailouts to embattled strategic SOEs as well as to limit borrowing and stabilise the country’s debt position. Nonetheless, the country’s economic trajectory remains subject to considerable uncertainty, particularly with at least another 18 months of regular blackouts forecast due to a sustained electricity supply shortfall. A repeat of the July 2021 devastating riots seems improbable in coming months, although insecurity is on the rise in most parts of the country.
- President Cyril Ramaphosa and his key allies will remain at the reins of the ANC ahead of the 2024 general election, ensuring continuity in key policy areas. However, Ramaphosa will continue to face opposition from across the party, particularly from the ANC’s RET faction, and will need to make compromises in order to advance anti-corruption efforts and economic development proposals. The ANC’s lack of progress in addressing internal corruption, deteriorating socio-economic conditions, and economic stagnation, has also compromised the party’s popular standing and key institutional support structures ahead of the 2024 general election. There is considerable uncertainty over whether the ANC’s key allies, including South Africa’s largest trade union, Cosatu, will part ways with the party before the next election.
- Deteriorating socio-economic conditions, coupled with weak law enforcement capabilities, will continue to drive an increase in the incidence of crime and civil unrest across the country. Organised criminal activity in particular has surged in recent years, and the threat of kidnap-for-ransom targeting wealthy local business owners is likely to persist. As the ANC’s popularity continues to shrink, internal competition over political posts will drive an increase in political violence, including assassinations of party figures, particularly in Kwazulu-Natal Province. A terrorism alert issued by international embassies in late 2022 highlighted the sustained presence of Islamist militants in the country, although the capability of such groups to carry out high-impact attacks inside South Africa is currently limited.
- South Africa’s economy has benefited significantly from the global commodities boom in the first half of 2022, driving a marked increase in revenues. As such, the IMF has revised South Africa’s GDP growth projections upward to 2.1 percent in 2022, driven in large part by improved performance across the mining and financial services sectors. However, in 2023 growth is expected to drop back down to 1.1 percent, reflecting a lack of liberalising reforms and the ongoing impact of electricity shortages. Nonetheless, improved revenues have allowed for the government to implement conditional bailouts of strategic SOEs, including in the energy sector. While a reduction in borrowing due to improved revenues is likely to see debt-to-GDP ratio stabilise at 68 percent in 2022, high debt servicing costs will remain a hindrance to development efforts.