By Rafiq Raji, PhD
Even as economic growth was negative in the concluding quarter of 2016, it was positive for the full year; though a paltry 0.3 percent. And the South African economy would probably pull further ahead in 2017. Much of the constraints (load-shedding, political noise, rand weakening and volatility, drought-induced food imports and price spikes) which hitherto bogged down the economy have become relatively subdued. The rand has rallied lately. Barring the now expected negative political event now and then – most recently, the social welfare payments crisis – the Zuma government has been relatively well-behaved as well. Nonetheless, growth remains far short of the authorities’ target. That is even as growth is expected above 1 percent this year. Policy uncertainty has also been raised a couple of notches: Would land be expropriated without compensation? Is the treasury going to be weakened? Is finance minister Pravin Gordhan going to be fired?
After the better than expected current account deficit data for the fourth quarter of 2016 – which came out at 1.7 percent of GDP, much lower than the consensus forecast of 3.5 percent – expectations have been raised that the South African Reserve Bank (SARB) would be able to cut rates sometime later this year, from the current benchmark level of 7 percent. Besides, the rand has been strengthening lately. Naturally, it is wondered whether this would be sustained at a time that the US Federal Reserve is decidedly now on a policy tightening path and external and internal political risks abound. Also, annual consumer inflation may remain above the SARB’s 6 percent upper bound target for most of the year. For instance, even if food prices become stable (a much bumper maize harvest is expected this season), power tariffs could rise: Eskom has already secured approval from the electricity regulator to raise tariffs by 2 percent in the 2017/18 fiscal year, in addition to getting leave to make additional hike requests if necessary. And should crude oil prices rise as envisaged, fuel prices would probably rise in tandem. Despite these though, the outlook looks promising, by and large.
Judging and ruling
Land expropriation without compensation. Xenophobic attacks fuelled by politicians trying to deflect attention from their corruption. Impunity enjoyed by certain favoured officials in the face of palpable incompetence. These are just few examples of the recently complicated turn of South African politics. In February, opposition Economic Freedom Fighters MPs were forcefully ejected from parliament as they frustrated the state of the nation address by South Africa’s president, Jacob Zuma; amid an unprecedented military presence on parliamentary grounds. And as the judiciary increasingly reins in the excesses of the executive, it has started having misfortunes of its own. The office of the chief justice was recently burgled, with crucial case files carted away, raising suspicions that those who could potentially be on the wrong side of the court’s judgements decided to be proactive. Such thinking is not farfetched. The boss of the elite police unit (“The Hawks”), Berning Ntlemeza, had his appointment revoked in mid-March by a high court, in a case brought against him by two non-governmental organisations. And only just before this recent rebuke of the executive by the judiciary, the constitutional court did not hold back its punches against social development minister Bathabile Dlamini, whose incompetence nearly put at risk welfare payments due 17 million people on 1 April.
With the courts becoming a pseudo-government of sorts, President Zuma has been pushing back: he rose in defence of Mrs Dlamini, an ally; albeit her survival is not unconnected to her leadership of the influential African National Congress (ANC) Women’s League, a voting bloc Mr Zuma needs if his preferred choice for the party’s presidency is to win the day in December (The two principal candidates are deputy president Cyril Ramaphosa and erstwhile African Union Commission chairperson Nkosozana Dlamini-Zuma). An imminent cabinet reshuffle by Mr Zuma is expected to help position Mrs Dlamini-Zuma for the top job. Mr Zuma has also deftly used the welfare payments crisis to bring the responsible agency under his direct control via his oft-used interministerial committee mechanism. Other power grabs are afoot. In mid-March, the ruling ANC indicated its desire for Mr Zuma to be “the strategic centre of power”, not the treasury. They want him (or whoever is president) to be the one who sets budget priorities that the treasury simply puts into action without question. Needless to say, the potential for abuse is best left to the imagination.
Also published in my BusinessDay Nigeria newspaper column (Tuesdays). See link viz. https://www.businessdayonline.com/rejoice-and-despair/