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If you think 2016 was a rough year in South African business as a result of political shenanigans, brace yourselves for the rest of 2017. Marius Oosthuizen, a business strategy expert at the Gordon Institute of Business Science, has looked into his crystal ball for an indication of what this year holds. The ANC succession race could play out in three ways, he reckons. The first route, and most likely if history is anything to go by, is one in which President Jacob Zuma clings to power and continues to embarrass his supporters. The second scenario would ease tension in the business community, with Cyril Ramaphosa forging ahead in the power stakes. The third option that is possible is what Oosthuizen refers to as the ANC wildcard: youthful Gauteng party elites staging a palace coup of sorts. This development would most likely catch opposition parties offguard and could help the ANC rebuild its support in metropolitan areas as well as potentially sparking investor optimism in what the long-term holds for South Africa. Whichever scenario unfolds, 2017 will be the year of ‘un-negotiated unsettlement’, predicts Oosthuizen. – Jackie Cameron
By Marius Oosthuizen*
2016 was a tough year for South Africa. It began with the after-shock of Nenegate, the unceremonious firing of former finance minister Nhlanhla Nene, and the brief appointment of Des van Rooyen as a so-called puppet minister at the hands of a seemingly captured president. Fortunately for South Africa’s economy, and for the integrity of the National Treasury, minister Pravin Gordhan was recalled and was able to stabilise the ship but only after a resultant R500bn wound to the economy.
Minister Gordhan spent the bulk of 2016 fending off personal attacks in the form of legal absurdities and false accusations while bravely earning the title of “first citizen” for his efforts at easing investor concerns. Notwithstanding these blunders and own goals by the Zuma government, South Africa successfully averted a sovereign ratings downgrade in late November and drifted into the festive season with a sigh of relief. That was 2016 and we all agree, it was a horrible year in the life of our nation.
2017 brings with it the prospect of great uncertainty. South Africa is an open economy, our currency and markets are directly exposed to developments abroad. The post-Brexit fall-out, the likely dereliction of his assumed global leadership duties by US president Donald J. Trump, and the looming disintegration of the European Union in the years ahead, will ensure that the global environment remains volatile and uncertain. The Johannesburg Stock Exchange’s current resources boom will continue, buoyed by demand for investment havens.
Productive job creating investment will however remain aloof. Locally, the succession battle within the ANC will be overshadowed only by the unavoidable and likely spectacular collapse of the union federation COSATU – a facade that has long been held up as the ANC’s claim to be a vanguard for worker interests. Instead the reality is that, under the ANC in the last five years, the job market has been a bloodbath and the labour absorptive segments of the economy have stalled.
Scrambling for political survival, President Zuma will probably table a program of action to accelerate land reform on the basis of the expropriation bill. 2017 will be a messy political year and a costly economic one for South Africa. Expect a sovereign ratings downgrade by September if not sooner.
At this point, the future scenario for the country diverges into three distinct possibilities:
Scenario one is a labyrinth where Zuma lingers while his fiefdom becomes increasingly fraught with embarrassment and betrayal. Under these conditions, the work of governing the country and particularly that of addressing the mismanagement of key state owned enterprises such as industry enabling Eskom and Transnet, is neglected in favour of narrow politicking for its own sake. Although the private sector will continue to get on with the business of running their corporations profitably through restructuring, the negative sentiment emanating from the Zuma-era’s political carcass will defer any prospects of serious local investment by private capital.
Scenario two centres on Deputy President Cyril Ramaphosa, who emerges out of the gate as a favorite for the top job, igniting brief national relief. The elite will see the deputy president as a competent, levelheaded pragmatist who understands that economic centrism, or a Third Way ideology, must be the cornerstone of a viable socially progressive state. He will postulate that a new economic revolution must now follow political reform, and be rooted in investment in the real economy.
Under these conditions the private sector will rally with short-lived optimism as relations with government improves. However, the labour related fault lines of the current political landscape will quickly undermine Ramaphosa’s agenda for stabilisation and growth. By the time the ANC calculates their prospects at the polls, without the vocal support of labour, Ramaphosa will look increasingly like a lame-duck candidate.
There is a third, wildcard scenario, in which the ANC embraces radical internal reform on the back of a clever palace coup by currently sidelined Gauteng party elites, such as David Makhura and Paul Mashatile. This modernised urban mob, recognising that they must regain the positive sentiments of the now robust black middle-class, would call for an early elective conference for the party as well as a early national election, whereby a fresh cohort of party leaders can be pushed to the foreground.
Should they seize the initiative in this manner, the Democratic Alliance and Economic Freedom Fighters will be caught off guard and their local government assault on ANC hegemony would be deferred. Private capital and the international investor community would watch these developments with cautious optimism, as South African resilience makes a comeback.
Across these three scenarios though, as the high politics of the day plays out, South Africans will continue to eek out a living in the sprawling suburbs of our now mostly urban country. Food inflation will pressure households, while frustrated and dejected youths look in dismay at their parents for an explanation of why there has been so little gold at the end of our rainbow story.
In these enclaves of South African normality, where Johnny Blue is not the drink of choice and Multichoice becomes increasingly unaffordable, there will be glimpses of a alternative future emerging for South Africa. This will be one where social innovators, working in local settings, construct the patchwork society that is the real South Africa, out of the diverse, unequal and deeply resilient fabric of our nation.
Strategic leaders, and those tasked with guiding the corporations and institutions that form the bedrock of our society, will need to rise to the occasion and provide perspective and hope as a counterbalance of what will otherwise be the year of our un-negotiated unsettlement.
- Marius Oosthuizen is Lecturer in Strategic Foresight (Leadership, Strategy & Ethics) at the Gordon Institute of Business Science (GIBS), University of Pretoria. He is also Program Manager: Future of Business in South Africa.