No time for complacency as ANC conference ends in uncertainty

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The much-awaited ANC National Conference has finally run its course – careening between smooth execution and organised chaos, and darting between the dark shadow of Jacob Zuma and the light of a new dawn under Cyril Ramaphosa.

qnIn the end good sense prevailed for a large part. Ramaphosa was elected as the ANC’s new president, the conference didn’t collapse in chaos and the two rival factions competing for control worked together in peace and relative harmony. But for every positive it soon proved there would be a negative that followed, as shown by the mixed bag of policy decisions which vacillated between populist radicalism and sensible moderation.

The ANC remains a schizophrenic party with two distinct rival factions battling each other. This clearly manifested itself in the top six leadership positions being divided between the two camps, the election of the 80 members of the National Executive Committee (NEC) being split along similar lines, and the adoption of policy proposals from both sides. In addition there are now two antagonistic centres of power – one in the Presidency in the Union Buildings, the other in the ANC presidency at Luthuli House.

Some hailed this as a successful attempt to forge unity; in reality the divisions remain as stark and troubling as ever. And with it the uncertainty remains as well, with a big question mark hanging over Mr Ramaphosa’s prospects for enforcing his reformist agenda…at least while President Zuma remains in the Union Buildings.

The dichotomy of the situation was neatly reflected in the reaction of the rand. At first, before and after Ramaphosa’s election, the currency got ahead of itself as it bounced along merrily to its biggest gains in a very long time, only to rapidly reverse its course once the policy decisions became known, particularly those on land expropriation without compensation and the nationalisation of the South African Reserve Bank.

Where does it leave you?

Where does this leave the individual with much to protect and watching as a mere spectator from the side lines? The simple answer: despite the optimism created by Ramaphosa’s election, this is no time for complacency.

The shadow of Zuma remains for now alongside disturbing policy uncertainties. Just as those who emerged in the ANC in a position to start undoing the ravages of ten years of Zuma rule cannot sit back and simply wait for everything to fall into place, investors and those with hard-earned assets cannot relax and be lulled into a false sense of security based on a single event. Politics like economics are dynamic phenomena, constantly prone to change and the unexpected. Vigilance, foreknowledge, regular reassessment, and proactively being in control by exercising options, remain key in determining the best route to a secure financial destiny.

Like the rand, quite a few financial and political commentators also got ahead of themselves, prematurely hailing Ramaphosa as the political and economic messiah who, with the wave of a magic wand will make all South Africa’s problems instantaneously go away.

That won’t happen. Not overnight at least. This is not to say that the election of Ramaphosa to succeed the widely discredited Zuma has not issued South Africa’s trampled and abused political play with a bright new script and long-overdue fresh breath of air. It brings with it our best hope for a start of the long and arduous journey to national recovery.

But as global ratings agency Fitch cautiously reminded us, while Ramaphosa’s victory will have far-reaching consequences, these will remain unpredictable alongside lingering uncertainties ahead of the 2019 elections. And Moody’s, the most optimistic among the three major agencies when it comes to South Africa, also warned that at best Ramaphosa’s election opens up the “tentative prospect of a shift in policy and a rise in business confidence that could reverse the gradual deterioration in South Africa’s credit fundamentals.” But, the agency added, “substantial political obstacles” to reform remain. We at Carrick Wealth share this cautious optimism.

With little more than a year to go before the crucial 2019 general election, South Africa will soon be going into election mode, usually characterised by smoke and mirrors and wild rhetoric. With the ANC pummelled into a losing corner in the 2016 local elections and fighting for survival as the governing party, political rhetoric aimed at winning over voters will be the order of the day. It will not be a period of doing or saying politically unpopular things, and thus it will be hard to discern truth from fiction, making for more uncertainty. This will make Mr Ramaphosa’s job of cleaning up and giving new direction all the more difficult.

The election of the 80 NEC members saw many of Zuma’s allies retaining their positions. But Ramaphosa’s allies were also elected in equal numbers, with a number of respected and trusted ANC figures previously ousted by Zuma making it back into the fold, including the respected former finance minister Pravin Gordhan.

Division of power

Many of Zuma’s allies – realising their futures will be tied to Ramaphosa – may now switch sides, which could only strengthen his position. This seems indeed to have already happened with the election of the top six officials. New deputy president David Mabuza, initially considered to be an ally of Zuma and losing presidential candidate Nkosazana Dlamini-Zuma, now seemingly backs Ramaphosa. It is said that in a surprise move, he helped engineer Ramaphosa’s victory by marshalling the large voting delegation from his province, Mpumalanga, to back Ramaphosa. That gives the Ramaphosa camp four of the top six positions.

The ANC’s New Top Six celebrate on stage during the party’s 54th national conference in Johannesburg on December 18, 2017. Photographer: Waldo Swiegers/Bloomberg

But the powerful ANC secretariat remains in the hands of two Zuma allies, new secretary general Ace Magashule and his deputy, Jessie Duarte. Magashule’s election, with a majority of only a handful of votes, could still be challenged in court. If the court challenge goes ahead and succeeds, it could bring a fifth Ramaphosa ally into the top six.

Aware of the untenable tensions that two centres of power could create, another policy decision dictated that power will centre in the ANC, meaning the NEC and the top six. Not only does that strengthen Ramaphosa’s position, but it also may facilitate the early removal of Zuma from the state Presidency. Zuma’s removal could also be hastened by the conference commissions resolving that a commission of enquiry into state capture should be implemented “expeditiously”. However, for now this remains another uncertainty.

Many uncertainties

While a number of radical populist policy decisions made it onto the ANC’s policy book, most policy decisions were, however, watered down to some extent by qualifying caveats being attached to them. A number of ANC leaders in speeches also tried to tone down the radical content of a number of these decisions.

Going forward, the next important events to watch will be Ramaphosa’s first delivery of the ANC’s traditional January 8 Statement which maps out programmes and policy issues for the year ahead; President Zuma’s delivery of the State of the Nation Address on 8 February, if he is still president; and Finance Minister Malusi Gigaba’s Budget on 21 February, if he is still finance minister, when he will be forced to increase taxes and address Zuma’s “free university fees” bombshell. The ‘ifs’ underline the ongoing uncertainty.

Given all this uncertainty that still prevails, Carrick believes it remains imperative to take action and control what you can to safeguard your investments. There are a number of options available, such as diversifying offshore or converting to international hard currency, among others.

For more information and to learn about all the available options, you can contact one of Carrick’s qualified advisers at [email protected].

  • Carrick Wealth is a registered South African financial services provider specialising in South African and international financial planning. Carrick is also licensed in Zimbabwe and Botswana, and holds three global licences in Mauritius. Carrick at all times maintains its independence with regard to product providers and asset managers, providing bespoke risk assessment, financial planning and other services to high net worth individuals (HNWI). Through our own qualified and experienced financial advisers, as well as through partnerships with industry leaders in the fields of foreign exchange, tax, international property, offshore bank accounts, trusts, wills and estate planning, Carrick is able to provide the highest levels of service for your financial planning and investment requirements, both offshore and domestic. This communication is intended solely for information purposes for the use of designated recipients and is not an offer, recommendation or solicitation to transact. While it is based on information available to the public and from sources believed to be reliable, Carrick makes no representation that it is accurate or complete or that any returns indicated will be achieved.