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Abu Dhabi, UAEThursday 13 December 2018

Country at a crossroads as Zuma's reign nears end

Result of highly contested leadership election is vitally important, not just for 57 million South Africans but for the rest of Africa

Nkosazana Dlamini-Zuma, one of the candidates for South Africa's ruling African National Congress (ANC) party leadership. Rajesh Janital / AFP
Nkosazana Dlamini-Zuma, one of the candidates for South Africa's ruling African National Congress (ANC) party leadership. Rajesh Janital / AFP

This weekend the world’s media will drag itself away from Brexit, Trump and the bitcoin mania to focus, at least for a few days, on the future of South Africa, the continent’s biggest economy. Journalists from across the globe are already arriving in Johannesburg for the 54th congress of the ruling ANC party, which is shaping up as one of the most important meetings in the party’s 103-year history.

The cover of the latest issue of the Economist magazine sets the scene. It features a giant snake in the colours of the South African flag, and the headline: "The corruption of South Africa”. That basically sums up the state of the nation in under the president Jacob Zuma whose leadership of the ANC comes to an end on December 20. Next week’s party decision on his replacement, says the Economist in its main leader, “may determine whether South Africa slides further into the mire or starts to recover”.

That is no exaggeration. The result of the highly contested leadership election is vitally important, not just for 57 million South Africans but for the rest of Africa. It will, in the words of the Goldman Sachs analyst Colin Coleman, “be a leading indicator of whether Africa will be a force for progress or instability in the world in the decades ahead”.

Mr Zuma, whose position as state president has still, theoretically at least, 18 months to run, is pushing hard for the succession of his former wife, Nkosazana Dlamini-Zuma, largely in the hope she will protect him from prosecution - and quite possibly jail - for the 783 charges of corruption he has been able to fight off in his nine years in office. Most observers, even stalwart ANC members, view the prospect of her potential presidency as a disaster, promising as it does another five years of policies that somehow have managed to turn what should be the most vibrant and fastest-growing economy in the developing world into a basket case.

Fortunately, there is a decent alternative at hand who moderate South Africans - and I don’t mean just the white population - fervently hope will win the day. Cyril Ramaphosa is a former trade union leader who played a key role in negotiating the peaceful transition from white rule to black rule in the early 1990s, went on to make a fortune in business and then went back into politics as Mr Zuma’s deputy president.

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The choice offered by the two candidates is stark. A victory by Mrs Dlamini-Zuma would consolidate the Zuma power base under which corruption, “state capture” – which basically means surrendering political decision-making to rich cronies, particularly the Indian-born Gupta family, in return for lucrative government contracts – and a dangerously underperforming economy have been entrenched. She launched her economic policies with an attack on the “policy independence” of the Reserve Bank and “white monopoly capital” with a demand for Mugabe-style “land restitution without compensation”. Market commentators, including the critical rating agencies, have condemned her policies as “populist” and a recipe for further economic decline.

Mr Ramaphosa, on the other hand, is seen as a moderniser committed to an anti-corruption policy and the replacement of incompetent Mr Zuma appointments with a new administration. He has already laid out his stall in the shape of a national development plan which targets GDP growth of 3 per cent next year and 5 per cent after that (the country has averaged less than 1 per cent for the past three years, well behind the population growth). The economic plan, which Mr Zuma has completely ignored, focuses on transformation, internships, a national minimum wage for the employed and permanent work opportunities for the unemployed.

The truth of the matter, however, is that whoever does take over – and Mr Ramaphosa is a narrow leader in the betting, although in ANC elections anything can happen – faces a monumental challenge. Unemployment is officially 28 per cent, one of the highest rates in the world, but rises to 33 per cent if the millions who have given up looking for jobs are taken into account. More people receive government grants – 17 million of them – than are economically active. Debt is rising, tax revenues are falling and the finances of some of the big parastatal companies, which are run by Zuma cronies who have openly plundered them, are in such bad shape they threaten fiscal meltdown. The debts of Eskom, the monopoly electricity supplier, could sink the nation on their own and SAA, the national carrier, staggers from one bankruptcy to the next. More downgrades lie ahead.

Mr Ramaphosa’s cause, though, has been weakened in recent days by two corporate scandals which have rocked the South African business world. The shares of Johannesburg head-quartered Steinhoff, the world’s second-largest furniture retailer after IKEA, fell by 91 per cent after it announced the German government was investigating it for fraud and its CEO resigned. Then came the revelation that South Africa’s largest company by market value, Naspers (it owns 35 per cent of Ten Cent), was involved in what looks perilously close to malpractice to preserve its lucrative monopoly of pay-TV. Mr Ramaphosa has no involvement in either, but his association with the white business community has provided fodder for his more radical critics.

The ANC conference kicks off on Saturday but we won’t know the leadership result until next Tuesday. It will be a nail-biting weekend.