Rand strengthens to R17.93/dlr, the highest level since August 2022, as markets react positively to President Cyril Ramaphosa's inauguration and GNU formation.(Illustrative image: iStock and Vecteezy) Towards the end of the sixth government administration, President Cyril Ramaphosa’s reform agenda had begun to notch some early wins.
The agenda has been aimed at implementing initiatives such as ending Eskom blackouts, turning around the performance of Transnet’s logistics network, and tackling crime and corruption to grow the economy and improve investor confidence.
The new leadership at Eskom and Transnet have started to stabilise the operations of both state-owned enterprises (SOEs), whose failures have harmed the economy over recent years.
At Eskom, there is a renewed focus on monitoring the performance of power stations, which has prompted the Presidency and organised business to forecast that higher stages of Eskom blackouts would end in 2024 or, at worst, be restricted to Stage 1.
Days before the 2024 general election, Parliament passed the Electricity Regulation Amendment Bill, which has been hailed as groundbreaking for ending Eskom’s 100-year monopoly on electricity generation.
The bill paves the way for the direct purchase and transmission of electricity not only from Eskom but also from private power producers, without going through cumbersome legal processes.
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At Transnet, processes are under way to partner with private-sector players to run trains and ports independently for a set period. Although Transnet has ruled out the privatisation of its logistics operations, it is allowing private sector players to use their skills to run trains and ports while also pouring in money to upgrade the flailing logistics infrastructure.
Read more in Daily Maverick: Transnet reveals details of plan to rope in private sector to fix its rail network
To tackle pervasive crime and corruption, the passage of the National Prosecuting Authority (NPA) Amendment Bill is in progress. It will pave the way to establish the Investigating Directorate as a permanent entity within the NPA with investigating powers to fight complex corruption-related crimes.
The business response to coalition politics
The outcome of the election, in which South Africa has been thrown into coalition politics at national government level, might create a challenge for the momentum of reforms. To recap: the ANC will have to negotiate with smaller political parties to form a national government after its electoral support fell by just over 17 percentage points to 40.18%.
Some business players are worried that the reform agenda could be derailed if a coalition agreement is struck with individuals or political parties that do not respect the Constitution and rule of law, and prioritise their interests over the country’s.
Among those concerned is Martin Kingston, the chair of Business for South Africa, a pan-industry body that is assisting the Presidency, SOEs and government departments with implementing reforms, along with more than 100 captains of industry.
“We have had no issues, as a partnership, dealing with the ANC government in our areas of focus for the last 12 months and we have seen a broad commitment to key reforms. I am concerned that some of the parties who are in [coalition] discussions at the moment have not demonstrated either sensitivity or commitment to reforms, governance and the sanctity of the Constitution,” Kingston told Daily Maverick.
“If there is any indication that there’s either a deceleration of reforms or the strategic decisions taken to date are going to be interrupted, then that is going to undermine confidence and create significant concern by both business and in the market,” he said.
The business players interviewed by Daily Maverick would not name the parties that the ANC should embrace or avoid, but stressed that a good coalition agreement would promote a stable government, respect the Constitution and believe in business-friendly policies.
Credit rating agency Fitch was more blunt, warning that public finances would deteriorate if the ANC relied on MK or the EFF to form a government. Such a government would push for populist policies that might worsen the country’s debt levels, erode macroeconomic stability and governance, and weaken investor confidence, Fitch warned.
Economists surveyed by Bloomberg believe an ANC-DA coalition could bring a stable government, higher economic growth and job creation on the back of improved investment flows.
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Cas Coovadia, the CEO of Business Unity South Africa, has described coalition politics as another “crossroads” moment for the country.
“One path [if a coalition is done right] leads to investment, inclusive growth, job creation and the resolution of our socioeconomic crises. The other path will deepen our crises and hamper the much-needed recovery, with the most vulnerable bearing the burden,” he said.
Busisiwe Mavuso, the CEO of Business Leadership South Africa, has called for a coalition agreement that promotes a stable government that “will continue the vital work that has already been done to put our economy on the right track to create jobs and tax revenue”.
She has called on politicians to put the country and its people first by striking a coalition agreement that prioritises reforms, makes institutions work effectively and professionalises the public sector.
“That is what putting South Africa first means. This is what South Africans deserve,” Mavuso said.
Regression
The Black Business Council (BBC), a lobby group that pushes for the participation of black people in the economy, holds a view on a coalition government that is different from other organised business groupings.
The BBC’s CEO, Kganki Matabane, has written to the ANC proposing coalition options. The BBC is against an ANC coalition with the DA, saying the DA campaigned on “repealing race-based legislation, including the Broad-Based Black Economic Empowerment”.
This, Matabane said, “will lead to a regression at a time when more transformation and redress are needed”. The BBC has instead recommended that the ANC embrace the EFF, MK, IFP and Patriotic Alliance, saying these parties are progressive “on education, healthcare, social security, human settlements, macroeconomic policy and international relations”.
However, the BBC is uncomfortable with MK’s proposals to nationalise most sectors of the economy and scrap the Constitution.
Organised business has modelled that South Africa has the potential to return to growth of 3% to 6% from 2026 if the government speeds up reforms. It has been about a decade since the economy grew at such levels.
Sanisha Packirisamy, an economist at Momentum Investments, has pencilled in growth of 1% in 2024, edging higher to 1.7% in 2025 and 1.8% in 2026.
Isaah Mhlanga, chief economist at RMB, supported her views: “It is important that the new administration accelerates the implementation of the structural economic reforms started in the previous administration to improve the business operating environment of the South African economy.” DM
This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.
