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Abu Dhabi, UAEMonday 18 June 2018

Five major problems South Africa's new leader must tackle

Cyril Ramaphosa, will likely became the nation’s leader when parliament elects a new president on Thursday

South Africa's President Jacob Zuma leaves after announcing his resignation at the Union Buildings in Pretoria, South Africa. Siphiwe Sibeko/Reuters
South Africa's President Jacob Zuma leaves after announcing his resignation at the Union Buildings in Pretoria, South Africa. Siphiwe Sibeko/Reuters

South Africa’s next president faces a tough road in rebuilding investor confidence and reviving the economy in the wake of Jacob Zuma’s nine-year tenure that was marred by scandal, misrule and policy missteps, coming to an end.

Mr Zuma resigned late on Wednesday night, almost two months after he was replaced as head of the ruling African National Congress by Deputy President Cyril Ramaphosa, who will likely became the nation’s leader when parliament elects a new president on Thursday.

These are some of the biggest challenges that will confront Mr Zuma’s successor:

1. Tackling corruption

Investigations by the nation’s graft ombudsman and auditor general found that graft is endemic in the state, with tens of billions of South African rand stolen or squandered each year. Mr Zuma appointees head almost all the law-enforcement agencies, which have been slow or loathe to act against some of his closest allies who’ve been implicated in the free-for-all. The new president will need to replace several key officials, reassert confidence in the independence and integrity of the criminal prosecution system and show that the government is intent on ensuring all those found guilty of corruption are held accountable.

2. State-owned companies in chaos

The looting spree largely targeted state companies, especially power utility Eskom, which is at risk of running out of cash. While Mr Ramaphosa has already overseen the appointment of a new board at Eskom, it still needs to appoint a permanent chief executive, fill several other top management posts and urgently raise new funding. South African Airways and oil and gas company PetroSA are among the other entities that have been been hobbled by a lack of leadership and oversight.

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3. Reigniting growth

While the government’s National Development Plan says an average 5.4 per cent economic growth rate is needed to meet its goal of slashing a 27 per cent unemployment rate, the central bank anticipates an expansion of just 1.4 per cent this year and 1.6 per cent in 2019. Greater policy certainty would go a long way toward boosting business confidence and investment in the economy. That is especially true for the mining industry, which accounts for half of South Africa’s exports and has been at loggerheads with the government for years over black ownership laws.

4. Warding off further credit rating downgrades

S&P Global Ratings and Fitch Ratings cut the country’s debt to junk in 2017 after Mr Zuma fired the respected Pravin Gordhan as his finance minister. Moody’s Investors Service put the nation on review for a downgrade in November, and is due to deliver its assessment in March. Another reduction of the local-currency bond rating to junk would trigger an exclusion of rand's debt from Citigroup’s World Government Bond Index and spark a sell-off by investors tracking the gauge. Avoiding that prospect will require the new administration to show its commitment to tackling corruption, bolstering growth and sticking to its expenditure ceiling and budget deficit-reduction plans.

5. Finding money to fund free tertiary education

Shortly before he was replaced as ANC leader, Mr Zuma announced that tertiary education for students from homes where the combined annual income is less than 350,000 rand ($29,880) would be fully subsidised. While the ruling party endorsed the plan, there’s no budget for it, and his successor will have to come up with ways to find the cash, which may mean unpopular spending cuts and tax increases.