It is widely accepted that if Cyril Ramaphosa is no longer the ANC president, and he is replaced by someone who is not investor-approved, will have a ripple effect on the economy. 

We had a small taste of this last week, when overtures of his resignation sent domestic asset prices into a tailspin. 

For investors, Ramaphosa — who has worked to attract business, prioritising economic reform and a degree of price stability — is the lesser of the two evils facing off at the party’s conference in December.

The private sector may not be totally won over by Ramaphosa, but at least there is some certainty that he will stay the course with some of his business-friendly reforms. 

On the other side is the ANC’s so‑called radical economic transformation (RET) faction, which, as the name implies, seems more willing to rock the boat.

But, on balance, the factional battle for the ANC presidency has little to do with progressive economic policy, which has been relegated to being a sideshow of what is ultimately a political spectacle. 

Ramaphosa has spent the past four years mending the ANC’s relationship with investors. When he announced his investment drive in 2018, the president indicated that doing so was a necessary condition for economic growth and to create jobs.

A large part of this effort to court investors has been undoing some of the damage done under the Jacob Zuma administration, which resulted in policy uncertainty and low business confidence. 

Foreign direct investment, Ramaphosa noted at the time, plummeted from R76 billion to R17.6 billion in the nine years preceding his presidency. Total fixed investment declined from 24% of GDP in 2008 to about 19% in 2017.

To correct this, the president initiated his investment drive and also implemented a number of reforms, the slow pace of which has not inspired the confidence needed to pull the country out of its growth slump — especially with a pandemic also weighing the economy down.

Until relatively recently, the president’s economic reform agenda seemed like yet another empty promise associated with the now forgotten age of Ramaphoria. 

But some good spin, as well as eleventh-hour interventions to deal with the country’s deepening energy crisis, has seemingly changed this perception, causing some to believe we may have finally turned the corner. 

Indeed, there now seems some hope that investment could finally start to tick up. Earlier this year, in its capital expenditure report, Nedbank suggested there is reason for “guarded optimism”. 

“After years of delays, we are now beginning to see some evidence of investment in essential economic infrastructure, particularly in energy, road and telecommunications,” the bank’s analysts said. 

“Although still not nearly enough to erase more than a decade of underinvestment, President Ramaphosa’s efforts to lift infrastructure expenditure, crystallised in every State of Nation address since 2018, in the Economic Recon-struction and Recovery Plan and the annual investment conferences, are finally starting to materialise in tangible new projects.”

Ramaphosa’s administration has also gone about restoring South Africa’s investment grade rating, which appears inextricably linked to its reform agenda. Like potential investors, ratings agencies have maintained their cautiousness, even as the president’s reforms seem to be bearing fruit. 

This week, Fitch Ratings said the Phala Phala matter Ramaphosa faces could influence policy and the ANC’s political prospects ahead of elections in 2024. But, it said, broad policy continuity is the most likely scenario.

“Political instability and increased uncertainty about the policy outlook could further weigh on near-term investment prospects if they weaken business sentiment,” the ratings agency added.

There is one big reason for ratings agencies to remain circumspect about South Africa policy outlook: the country’s low growth dilemma, which has been flagged as a key credit weakness.

The South African Reserve Bank’s monetary policy committee (MPC) recently revised the country’s GDP growth down from 1.9% to 1.8% in 2022, from 1.4% to 1.1% in 2023 and from 1.7% to 1.4% in 2024.

“Over the medium term, and despite stronger private investment, the forecast takes into account lower commodity prices, higher inflation and interest rates,” the MPC said in its November statement. 

“On the supply side, the forecast incorporates an assumption of increased load-shedding, which could deduct 0.6 percentage points in 2023.”

Here lies the problem underlying Ramaphosa’s economic projects — structural reform alone is not nearly enough to drive meaningful economic growth and job creation, especially during a recession.

Ramaphosa’s administration, as well as the ANC more generally, has been criticised for an over-reliance on structural reform and its dearth of progressive macroeconomic policy. 

Structural reform addresses the supply side of the economy and entails improving the business environment and thus removing constraints to investment. 

They often take a long time to boost growth and, in the context of South Africa, there is little evidence that any progress will also be inclusive.

Macroeconomic policy, on the other hand, addresses the economy as a whole. It, too, aims at driving economic growth, but uses fiscal, monetary and exchange rate policy.

In the absence of a progressive macroeconomic framework, other economic and social reforms

aimed at addressing growth, employment and inequality will probably fail.

A progressive macroeconomic framework may include, for example, increasing public spending on infrastructure, employment targeting by the central bank and introducing capital controls. 

But instead of meaningfully pursuing these interventions, Ramaphosa-era policies (as well as those sought by former presidents Zuma and Thabo Mbeki) have furthered austerity and monetary orthodoxy. 

The result has been pitiful economic growth, record unemployment and a stubborn inequality crisis.

For this reason, there is little that distinguishes Ramaphosa’s economic agenda and that of the RET faction, even though the populism that has characterised the latter has tried to ignore this. 

Both target restructuring the economy, which has been at the centre of the ANC’s agenda since the party assumed power. Both are reticent about policies that will drive growth if they are perceived as being to the detriment of their political benefactors.

Where they differ is who each faction wants to restructure the economy for — and, despite what the one faction would have its followers believe, neither seems particularly interested in the fate of the poor and the working class.

So, while investors may be holding their thumbs for a Ramaphosa presidency, the best outcome for the majority is that the current factional battle exposes the ANC’s enduring ambivalence to the fate of the real economy.

Sarah Smit is a Mail & Guardian business reporter.

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