Johannesburg holds the key to South Africa’s national reset: Katzenellenbogen

Key topics:National Dialogue seen as a distraction from real reformCalls grow for centrist agenda to fix SA’s fiscal crisisDA may gain mandate to reform via Johannesburg turnaround.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.The auditorium doors will open for BNIC#2 on 10 September 2025 in Hermanus. For more information and tickets, click here..By Jonathan Katzenellenbogen*.Listen to the talk shows on the radio, the policy wonks and people on the street. There is a growing sense of collapse and crisis. Not only is the economy hardly growing and unemployment at astronomical levels, and our dorps and major cities, bar Cape Town, are in a mess, but there is also a strong sense that there is no real leadershipThere is a widespread view that we are now at a dead end, and in dire need of some sort of reset.President Cyril Ramaphosa is clutching at the straws of a National Dialogue for a social compact and a vision, rather than really leading, reforming, and implementing big positive changes. The National Dialogue could become a National Distraction from actually doing something about our problems.Ramaphosa’s Operation Vulindlela, which is meant to address the bottlenecks in the economy, is very limited. The public enterprises remain in a deep mess.The allegations of KwaZulu-Natal police commissioner Lieutenant General Nhlanhla Mkhwanazi have yet to be verified, but they suggest our descent into a mafia state.What is the agenda to halt our descent?There is increasing deep thinking about this by the policy wonks. Last week, a conference on “Achieving an Inclusive Economy”, arranged by the FW de Klerk Foundation, was intended to help find the way out of the crisis.The sketches of an agenda to halt the slide emerged. It is somewhat similar to the policies proposed by the Institute of Race Relations, aspects of DA policy, and policies supported by other broadly centrist think tanks. In our dire situation, the agenda could at least be listened to more widely.For the moment, nothing in the way of a real growth strategy seems to be emerging from the left or the ANC.Emerging agendaOne basis for this emerging agenda is that the country’s fiscal path is unsustainable, particularly with the pressures on the tax base from an economy in the doldrums. Social grants will make up about 16 percent of government spending this fiscal year, up from 12 percent last year, and cannot be sustained at much greater levels. Civil servants’ pay makes up nearly a quarter of spending, and debt service is now the largest and fastest-growing category.There is no formal centrist agenda yet, but it is pretty much a growth one, and involves privatisation, curtailing government spending and the size of the state, cutting red tape, ending Black Economic Empowerment, and ending talk about expropriation without compensation and National Health Insurance.The sense of crisis is certainly injecting a new urgency into establishing this agenda.As much as this agenda might have technical merit, its success will ultimately depend on playing the politics right. The ANC has powerful vested interests in the civil service, the police, the unions, and among the tenderpreneurs who all benefit from a big and generous state..Read more:.Helen Zille’s high-stakes gamble: Can the DA take Johannesburg? - Nicholas Lorimer.A big test of the ability to implement a reform agenda will come if the DA does well in next year’s local government elections in Johannesburg. Drive around the city and its accelerating decline is clear. Repairs to Lilian Ngoyi Street, formerly Bree Street, after the explosion ripped the road apart, are still not finished. Johannesburg is Africa’s Gotham.The coalition that turns around Johannesburg might be trusted at the polls to turn around the country. Here we have a real crisis, which could give the DA and its potential alliance partners a strong mandate, if they are able to achieve a wide margin of victory. With that, they could take on the unions, the civil servants, and city management.Firm basis for optimismIf the DA makes Helen Zille its mayoral candidate and she gets the job, it will have the leadership that managed a coalition that turned Cape Town around. Success in Johannesburg would be a firm basis for optimism, albeit guarded, about the country.In Johannesburg, the DA and its allies would have to take on the same vested interests that lie behind ANC power. It is likely that there will be a strong push-back, and it is uncertain whether prosecutors, the police, and the metro cops will be on the side of the city’s elected government of the day. It might take time, but showing that the game is up and power lies elsewhere could be the sort of serious start to the national unravelling of ANC power.Significant reforms, for which there might be political costs, are best carried out during crises, and in democracies, when a new government has won a strong election mandate. If the DA and its alliance partners won by a large margin, this would give them a mandate to revamp city government.In Argentina, President Javier Milei was given a strong mandate in late 2023, after the country had a monthly inflation rate of around 25 percent. Under Milei this has come down to 1.6 percent at the most recent reading, and growth has been far stronger than it was under his predecessor. Having these sorts of early successes helps maintain economic support for a reform programme.India undid its “Licence Raj” on the back of a foreign exchange crisis. In China the impetus for initial reforms in allowing small enterprises to be privately owned came on the back of what was already happening outside the law. But there was fear about its economic future, and pressure from seeing the immense success of the Asian Tigers in South-East Asia.South Africa has an independent and well-run central bank, sitting on large foreign exchange reserves. It is in a good position to forestall financial crises. Hence the pressure of a crisis may not emerge as the catalyst of change.But as the late Massachusetts Institute of Technology economics professor Rudiger Dornbusch warned, “In economics things take longer to happen than you think they will, and then they happen faster than you thought they could.”Lot more vulnerableCertainly, in a tough international economic environment, we are a lot more vulnerable. Slow international growth and tariffs of 30 percent on our exports to the US raise the chance of a severe economic shock.Even with a crisis, leadership is all-important in ensuring reform and in navigating difficult politics. The opportunities must be seen and coalitions built. Here is inevitably a strong push-back towards change.Having what William Gumede, who spoke at the FW de Klerk Foundation’s conference, says is a “centrist consensus” is important as a basis for a political realignment. Our outlook does not look good now. But there is a strong drift away from the ANC, and the parties in the Government of National Unity have exercised power in unexpected ways over the VAT increase, and in refusing to vote for the budgets of compromised ministers.So, things just might happen faster than we thought they could..*Jonathan Katzenellenbogen is a Johannesburg-based freelance journalist. His articles have appeared on DefenceWeb, Politicsweb, as well as in a number of overseas publications. Katzenellenbogen has also worked on Business Day and as a TV and radio reporter and newsreader. He has a Master's degree in International Relations from the Fletcher School of Law and Diplomacy at Tufts University and an MBA from the MIT Sloan School of Management..This article was first published by Daily Friend and is republished with permission

Johannesburg holds the key to South Africa’s national reset: Katzenellenbogen

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