How world sees SA: SASSA payments fiasco could hammer ANC support, knock GDP

No-one wants to see the most vulnerable suffer, yet it is heading that way if the government doesn’t get its house in order. A crisis has unfolded in the payment of social grants, as controversy rages around the involvement of Net1’s Cash Paymaster Services, whose contract was declared invalid. The South Africa Social Security Agency (SASSA) has been pushing to enter into a new agreement for another year. Allegations of irregularities have been swirling around Cash Paymaster Services, however the matter is complicated – and with huge sums at stake, the battle for this contract has got ugly. Add to this fiasco that SASSA represents the face of the ANC government to vast swathes of its voters in rural areas and you can see that the ruling elite has a reason to keep the current service provider in place in order to avoid disruption to pay. The alternative, cautions a leading London-based commentator, is a fall in retail sales and, more importantly for the ANC, a shock to its support base that could see many voters switch allegiance as the administrative failures of government hit home. Could the SASSA crisis be the one that shakes up the country’s political establishment for the better? – Jackie Cameron

From Fin24

Cape Town – The probability of an exit by Finance Minister Pravin Gordhan has grown because of increasingly belligerent comments from the Zuma camp and wider attacks against National Treasury, according to emerging markets economist Peter Attard Montalto of Nomura.

He also thinks the removal of the deputy minister of finance is “most likely”.

File photo. Supporters of South Africa’s President Jacob Zuma’s ruling African National Congress (ANC). REUTERS/Mike Hutchings

“However, the ultimate aim of a reshuffle will be to stop the increasing momentum the Zuma camp is sensing from SACP members, including those in the National Treasury from swinging the elective conference their way in December. President Jacob Zuma is running out of time, however,” said Montalto.

“A lack of reshuffle by end March may lead to a significant market rally. A reshuffle, however, could cause major market dislocation especially with a March Federal Open Market Committee (FOMC) hike. Ultimately, President Zuma will wait for the best moment, requiring market patience.”

Montalto said on Thursday that interactions with investors have had an “interesting feedback” on Nomura’s views, as the market gets a firmer hold of the dynamics of succession.

Nomura gives a 60% probability of a Zuma camp win with a slightly lower probability of a Dlamini-Zuma win.

Peter Attard Montalto

“We think it will be a closely-run thing and the unpopularity of both of the key candidates at branch level will be a key factor. Two areas we have had much push back on for people thinking about the higher probability of a Ramaphosa success are the situation in KZN and the wider level of support he is commented by some as having,” said Montalto.

“It is true that KZN is much more split than at any time in the last 15 years and active campaigning from the Ramaphosa camp is helping deepen this divide. However, we ultimately do not think an elective conference is about raw support at the branch level.”

Instead, he thinks it is a complex mix of sorting, shifting and filtering through “captured” structures that can change up to a final vote on the floor of the conference.

“This is why we still have a Nkosazana Dlamini-Zuma victory as our baseline. That said, the social security issue and significant personalities in both camps at this time, not to mention an uncertain fallout from a reshuffle, suggests anything can happen still and probabilities will fluctuate the year,” said Montalto.

Social security crisis

A looming crisis over social security grants could have significant knock-on effects for politics, according to Montalto.

In his view, the government is trapped between accepting an illegal contract and the risk of social security grants to some 17.1m recipients not being paid from 1 April.

“If payments are not made it could have a severe impact on growth. It would wipe 11.6% from retail sales for a given month, not to mention the hardship of individual families – the majority of recipients are outside the formal economy,” said Montalto.

He said failure to make a month or more of payments means 2019 could become about the logistics of redistribution and would cause a much more deep shock into the ANC’s support level from even rural areas.

“It also plays into the elective conference dynamic and may shift the needle, causing a shift away in support from the status quo much more likely,” said Montalto.

Source: Fin24

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