Business

Ramaphosa win will provide instant confidence boost – economist

2017-12-14 10:01

Deputy President Cyril Ramaphosa is the favoured candidate in the ANC race, among both big business and investors as well as the country’s largest trade unions.

His economic vision, which he called a “New Deal” and launched in Soweto in November, outlines his ambitious promises to deal with high unemployment and rising poverty as follows:

• A Youth Employment Service programme by government and business to provide a million paid internships to unemployed young people within three years;

• To grow gross domestic product by 3% in 2018 (the World Bank forecasts growth of 1.1%); and

• Land redistribution will be accelerated in combination with systems to improve land productivity and support for new farming activity.

Policy: something for everyone

Although Ramaphosa’s policy aims are closely aligned to those of his rival, ANC MP Dr Nkosazana Dlamini-Zuma, Mike Schüssler, chief economist at Economists dotcoza, believes he’s “perceived to be better at implementing policy”.

“It’s a strange thing, his PR campaign managed to move him away from the [President Jacob] Zuma story, which he was part of,” he said.

Ray Hartley, author of the book Ramaphosa: The Man Who Would Be King, warns the broader ANC elected leadership will need to support him if he is to turn the country’s fortunes around.

“The key thing is not just winning at the conference but also winning the majority in the national executive committee. Zuma had the backing of the majority in the [executive committee] and that’s why he survived for so long,” he commented to Fin24.

Billionaire businessman Ramaphosa promises “inclusive discussion”, adds Hartley, while the ANC in the Zuma administration has been seen as anti-business. 

Daniel Silke, a Cape Town-based political economist, believes Ramaphosa’s negotiating skills used during the Codesa discussions pre-1994 and his manoeuvering to establish a national minimum wage by 2018 bode well for policy certainty. 

“South Africa needs a concerted rescue effort with a much broader buy-in; Ramaphosa can do this,” he says.

Pent-up confidence waiting to be released

The rand surged in December 2012, when Cyril Ramaphosa was elected deputy president of the ANC at the 53rd national conference in Mangaung.

Schüssler attributes the rand strengthening in recent weeks to around the R13.50 mark against the US dollar ahead of the conference, to markets “expecting” Ramaphosa to win.

“If markets get a shock, it will set the cat among the pigeons - the rand could fall 50 cents to the dollar,” he warns.

Hartley views Dlamini-Zuma and Ramaphosa’s chances of winning as “neck and neck”. He said investors are waiting for an opportunity to see change.

“If he becomes president, there would be a lot of pent-up confidence in the markets released,” he said.

But he warns against seeing a possible Ramaphosa win as a silver bullet to the growing fiscal deficit, sluggish economic growth and widening tax revenue gap South Africa is experiencing.

“The things that need to be done are huge. Ratings agencies aren’t flattered that easily by pronouncements; they will look at the bottom line, to see whether South Africa has reduced borrowing,” Hartley said.

No magic wand

Several large South African businesses – such as mining company Sibanye-Stillwater and FirstRand – have diversified into international markets, while domestic business prospects remain muted. 

Silke said that in the short term, a Ramaphosa victory would provide a “confidence upturn” for both domestic and international investors.

“If Ramaphosa is elected at the ANC conference this weekend, he’ll immediately have to deal with short-term issues in a form of 'crisis management',” he said.

Schüssler agreed, saying that if household confidence improves, business confidence will also rise. However, he warned this will not be an “immediate switch”.

“Ultimately people are too optimistic - [if Ramaphosa wins] he can’t fix everything with a magic wand," he added. 

Throughout his campaign, Ramaphosa has faced allegations of being a stooge for white monopoly capital.

Hartley dismissed this claim, and argued that the former unionist was “manipulative” and “controls the environment he’s in”.

“The question is, who’s using who here. He went into business with nothing post-1994, the idea of anyone telling him what to do is laughable,” he said. 

August 18 2019