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Abu Dhabi, UAEFriday 22 June 2018

As Zuma insists on giving final speech, clouds roll in over South Africa

Economy is in a bad way and the longer Mr Zuma clings to power – technically his term runs to mid-2019 – the worse it gets

Members of the African National Congress (ANC) protest outside the party's headquarters in Johannesburg, calling for President Jacob Zuma to step down. Themba Hadebe/AP
Members of the African National Congress (ANC) protest outside the party's headquarters in Johannesburg, calling for President Jacob Zuma to step down. Themba Hadebe/AP

It has been a week of high drama in South Africa – and it is not over yet.

With just days to go, it is still not clear who gives the key-note State of the Union Address (Sona) to parliament tomorrow, which sets out the political and economic agenda for the next year. The out-going president Jacob Zuma is scheduled to deliver it, but he may well be gone by then, swept from office by a tide of political and public opinion that wants his disastrous nine-year rule to end now. His deputy and the new leader of the ruling ANC, Cyril Ramaphosa, stands poised to step in.

Mr Zuma, however, is not going without a fight, and is insisting he will go ahead with Sona regardless of the chaos that will attend it. South Africa’s economy is in a bad way and the longer Mr Zuma clings to power – technically his term runs to mid-2019 but there is no chance of him getting that far – the worse it gets. Mr Ramaphosa led a delegation of South African officials and business people to Davos last week where he tried to reassure the global investment world that the country “is open for business” and was dealing with the issues of corruption and the lack of economic growth. And he was believed: since he replaced Mr Zuma as ANC president in December the rand has hit a three-year peak, the best performing currency in the world over that period, investment outflows have reversed to record levels of inflows and the whole mood across the country has lifted.

But the past few days, during which Mr Zuma’s defiance has resulted in ugly demonstrations and fighting on the streets of Johannesburg, have endangered all that. Euphoria and optimism are already giving way to business as usual, with the Ramaphosa magic in danger of wearing off.

This week the heads of just about every big – and small – mining company in the world has been in Cape Town for the annual African Mining Indaba, acted out against the twin dramas of Mr Zuma’s final days and a crippling drought which threatens to make this beautiful city the first in modern history to run out of water.

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The mining chiefs, already astonished by scenes of people queuing at stand-pipes to gather water – and at the lack of bath-plugs in their hotels - were less than impressed by a speech from the mineral resources minister, Mosebenzi Zwane, who delivered what the local Business Day newspaper described as “a dull and apathetic opening presentation” which didn’t even touch on the crisis his much-criticised mining charter has created in the industry.

“The mining community wanted to hear direction and resolution to some significant issues in the South African context, but nothing came forth,” said Jacques Barradas, partner and head of mining at Grant Thornton.

In Davos, Mr Ramaphosa promised that the charter, which seeks to forcibly transfer ownership of the mines into black hands without proper compensation, would be “revisited” but Mr Zwane, another Zuma acolyte who faces corruption charges of his own, clearly hadn’t got the message. “The challenges in the regulatory environment in 2017 were arguably the worst the mining industry has ever experienced,” said one delegate. “Initial signals from the ANC give us hope, but they must be followed up by action.” Clearly there will be no action while Mr Zwane is around – which hopefully won’t be much longer.

The plight of the mining industry, once the engine of the South African economy, is just one of the issues Mr Ramaphosa will have to deal with when he does become president, which hopefully will be this week. Economic growth has all but stalled, making South Africa the worst performing economy among the emerging market countries, unemployment is the highest in the world at an official 27 per cent, the big state-owned enterprises such as the utility Eskom, the airline SAA and the arms manufacturer Denel are bankrupt, and the country’s debt has been downgraded to junk.

Under the current finance minister, Malusi Gigaba, the country’s finances are in ruins. Mr Gigaba, if he survives that long, is due to deliver a budget next week against the background of a 50 billion rand (Dh15.2bn) “hole” in tax revenues and the need to find another 40bn rand for free university education that Mr Zuma committed to in December. Filling the gap means tax increases, probably another 2 per cent on VAT which hits the poor harder than the rich, as well as increases in income and company taxes.

High noon is Sona when, as now seems inevitable, Mr Zuma step up to address the national assembly for the last time. If he does, it will be an utterly chaotic and even violent occasion: emergency evacuation drills were rehearsed over the weekend in anticipation of an angry demonstration by the opposition EFF party, which is insistent he will not be allowed to speak from the podium. The EFF has already successfully laid down a motion for a vote of no confidence for February 22, the ninth that Mr Zuma has faced.

If he loses it – which he probably will - he faces instant dismissal and the loss of his lucrative pension and other retirement perks. That may focus his mind. Nothing else seems to.