Zuma is a liability to ANC and South Africa
April 19, 2016
In early April, Jacob Zuma only just survived the second motion by opposition parties calling for his impeachment. Prior to that, in late March, the Constitutional Court – the highest court in the country – handed down a stinging rebuke of President Jacob Zuma for breaking his oath in office to uphold the constitution.
The Court ruled on the $16 million upgrades to his private Nkandla residence. The upgrades included non-security related features such as visitor centre, animal enclosures and a swimming pool. The Court also included a scathing snub of the National Parliament, which failed to hold the president to account.
The Nkandla scandal has come to define the Zuma presidency
The ANC’s reluctance to hold Zuma to account can be explained as part of a broader culture of unaccountability in the public sector and within the ANC.
Recent allegations of state capture involving the President and close personal associates, including his son Duduzane Zuma, can be seen as the latest in a series of scandals that have rocked the Zuma presidency.
According to Transparency International, the perception of corruption has steadily increased in the country. Since 2001, South Africa dropped over 20 places to 61st out of 168 countries (2015). Compromised and politically connected public sector officials thought to be guilty of misconduct are either “redeployed” to new positions or rewarded in the way of lucrative golden handshakes.
Zuma may face recall after local elections
The litany of endless scandals surrounding the President has resulted a protracted and unprecedented crisis for the ANC. There is a precedence for recall by the ANC, dating from when Zuma’s predecessor Thabo Mbeki was recalled nine months before his term ended.
Mbeki had fallen fowl of the emerging Zuma power block. Question is whether Zuma will be able to serve out the remainder of his term until 2019. The short answer is no.
There is a very strong likelihood that President Zuma will be recalled after the local elections to be held on the 3rd of August 2016. The rationale for sticking with Zuma until after local elections is to avoid the damage playing into opposition parties’ hands.
Holding on to Zuma could cost the ANC dearly
Accounting for 39% of the country’s GDP and home to over 12 million citizens, the Gauteng Province’s twin cities of Johannesburg and Pretoria will be key battlegrounds. In the 2014 general election the ANC lost ground in the Gauteng Province, seeing its support base shrink to 54% from a confident 64% in 2009.
The ANC Gauteng chapter is regarded as anti-Zuma, having been at odds with him since the 53rd National Conference of the ANC in 2012.
Were the ANC to lose control of Johannesburg or Pretoria, it could result in further splintering of the party along factional lines. This would mire the ANC in an even deeper crisis, right before the 2019 national elections.
Those who stand to gain the most from disintegration are radical Chavez-style populists, the Economic Freedom Fighters (EFF). EFF is a populist, pro-poor political party led by Mr. Julius Malema, a one-time ANC Youth League President and key former Zuma supporter. The recently launched EFF has effectively tapped into the growing discontent, especially among the youth.
Malema’s EFF won over 6% of the national vote in the 2014 national elections, only four months after launching. Malema is making serious inroads into the traditional support base for the ANC, increasing pressure by relentlessly pursuing Jacob Zuma.
Underscoring the inability of the ANC under Zuma to address the needs of the marginalized, the EFF are promising to nationalize banks, including the reserve bank, and industries, including mining.
A gamble of political expediency
Until now, the ANC has attracted support by pledging to fight historical and structural challenges, such as high unemployment (24.5%) and widespread poverty (40%), both of which affect blacks disproportionately. Over 20 years into democracy, the ANC-led South Africa struggles to live up to expectations and shrug off political crises.
Given the sluggish economic outlook of 0.6% and 1.2% GDP growth for 2016 and 2017, the economy appears unable to dynamically address these fundamental challenges.
Slumping global commodity prices weigh down further on growth. Following a weak 2015, sharp contractions in the mining sector in January 2016 places added emphasis on fiscal restraint and policy certainty. The mining sector accounts for over 50% of FOREX earnings for South Africa, making it vital to the economy.
Rating agencies downgrade South Africa
In December 2015 Fitch Ratings agency downgraded South Africa from BBB to BBB-, one notch above junk, with a stable outlook. Standard and Poor (S&P) revised its rating from stable to negative.
During this period, the Finance Ministry saw a shuffle of three finance ministers in one weekend, causing a sharp depreciation of the currency to historical lows. The ousting of the former Finance Minister, Nhlanhla Nene was allegedly an attempt by Zuma and the influential Gupta family to seize hold of the national treasury. Well-respected former Finance Minister Pravin Gordhan was catapulted in for a second stint, bringing stability to the markets.
Citing this incident, and a weakening economic outlook, Moody’s placed South Africa on review for junk status in March. The S&P review in June will be a key indicator of what is to come from the other rating agencies.
A credit downgrade to junk status could prove a pivotal moment in South Africa’s history. Risks are expected to increase sharply leading up to the local government election in August, and to the national election in 2019.