South Africans have become accustomed to having a president that is a bit of a clown: falls asleep on the job, can’t count properly and is generally daft on a day-to-day basis. But the international community is still coming to grips with the reality that a man of his ilk is running a major economy on the African continent. What’s more, the message is spreading fast that President Jacob Zuma is highly incompetent at his job to the detriment of investment returns and business growth. In a commentary, influential Wall Street adviser Ian Bremmer has politely referred to Zuma as “functionally illiterate on economics”. Reality is starting to dawn beyond the borders that South Africa is now a kleptocracy, effectively ruled by thieves. Bremmer points to some positive aspects about the South African economy, including that the elite is a better racial mix and that the country is less dependent on commodities. But those highlights are unlikely to be enough to sway investors who see South Africa as a deeply dysfunctional country and they are unlikely to stave off a ratings downgrade for much longer. The rot has set in and international investors aren’t convinced it will be excised any time soon, is the stark message from Bremmer. – Jackie Cameron
By Matthew le Cordeur
Cape Town – South Africa’s day of reckoning with international rating agencies is coming as a result of President Jacob Zuma, who “ushered in a kleptocracy that’s now reached deep into his entire administration, barring the Treasury”.
That’s the view of Eurasia Group president Ian Bremmer and author of Time magazine’s list of the world’s top geopolitical risks, who visited South Africa in February on a fact-finding mission.
Bremmer placed South Africa in 10th place on the Times risk list, an alarming position to be in considering the various tensions rising around the world.
An influential Wall Street adviser based in New York, Bremmer is a leading political scientist specialising in US foreign policy, states in transition and global political risk.
In an email to investors, analysts and economists around the world, Bremmer said he “encountered one of the most dysfunctional governments in the emerging market space right now”.
Zuma is ‘functionally illiterate on economics’
“President Jacob Zuma is an exceptionally savvy political tactician but functionally illiterate on economics,” said Bremmer.
“And he’s ushered in a kleptocracy that’s now reached deep into his entire administration, barring the Treasury.
“That they’ve managed to forestall credit downgrades is surprising, but the day of reckoning is coming, especially as the political pressures around Zuma mount.”
He pointed to hope in the form of Deputy President Cyril Ramaphosa, but said it seems he doesn’t have enough votes within the African National Congress (ANC) to make his rise to the presidency a reality.
“There’s an eclectic but significant alliance forming around … Ramaphosa to take over the leadership of the … ANC party in December, with big business, the country’s trade unions, and the communists all hoping for an alternative to Zuma’s corruption.
“Ramaphosa certainly holds the moral high ground among party members, but that doesn’t count for much in the party’s internal elections, which will see some violence and is likely to be about brown envelopes rather than policy positions.
“At least for now, it doesn’t look like Ramaphosa has the votes inside the ANC.”
Glimmer of hope
However, Bremmer offered a sense of hope.
“Still, that doesn’t mean the wheels are about to fall off South Africa,” he said.
“There’s a rich talent base in the country – only about 20% of South Africa’s whites left the country post-apartheid, and the elite labour pool is now reasonably well mixed between black and white.
“Further, South Africa’s economy is no longer dominated by commodities, but instead has diversified towards infrastructure, services and information technology, all of which bodes well for a comparatively inexpensive and high quality-of-life destination.
“Education remains poor and immigration is limited (mostly because of spotty execution on visas rather than the policies themselves), which limits the upside, but you already see South Africa, on Europe’s time zone, becoming a more attractive back office destination for European firms.”
Africa’s rise is also good news for South Africa.
“As Africa itself continues to grow, the base for diversified firms continues to be South Africa,” said Bremmer.
“Especially because the larger African markets – Egypt and Nigeria – are otherwise unattractive as destinations for regional hubs.
“For increased consumption and infrastructure, Africa overall will still see moderate to high growth. Companies that plan on expanding investments accordingly will mostly situate themselves in South Africa.” – Fin24