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Event
January 26, 2009

Current Developments in South Africa

with
Michael Spicer

By kind invitation of The Rt Hon Peter Hain MP, the Henry Jackson Society was pleased to host a discussion with Michael Spicer, CEO of Business Leadership South Africa on recent Political and Socio-economic developments in South Africa.

Transcript

I am positive about the future of South Africa. As an emerging market it is one of the better placed to survive and prosper in the medium term through the current economic turmoil. It is true that there are going to be difficult times ahead but I am nevertheless optimistic about South Africa.
Political Developments

The persona of President Mbeki – his perceived aloofness, centralisation of power, his management of parliament, policies on Zimbabwe and AIDS, and his treatment of the opposition laid the path for the advent of Jacob Zuma. This accession became even more likely with Mbeki’s decision to stand for a third term and to allow the ‘movement of the wounded’, those who suffered from his strategies, to coalesce around Zuma and ultimately to win.  The Mbeki-ites were also rather complacent in this regard. This is seen by many as the rise of left, which many people suggest will result in a shift to the left in politics and economics. In reality the complexion of the ANC today is as diverse as was the Mbeki ANC. A spectrum of views continues to be represented and contested, and this diversity is a strength.

The precipitation of COPE, the breakaway party, has occurred for a number of reasons – unhappiness with the way that Mbeki and the middle classes and their values had been treated, displeasure with the behaviour of the youth league and attacks on universities, judges and the press.  COPE has a diverse leadership but its policy platform is not very well defined and not easily distinguishable from the ANC’s position. It is currently too early to tell exactly what its performance at the election will be; I believe that the various opposition movements have the capacity to win some provinces and there is the possibility that the ANC might lose its two-thirds majority.  This view is not shared by everyone.

Over the medium and long term, we are seeing a realignment of the political spectrum as it begins to emerge in a more conventional shape. I see this change as inevitable because we are now running a modern industrialised state in a global economy and as such, values based politics is to be anticipated.

In the short term, much depends on the trials on Jacob Zuma. Despite this, it is likely that he will emerge as President, in terms of what this means for South Africa, he does hold conservative, traditional views but equally he is personable and able to interact effectively with many audiences (he has begin to build up contacts in US, something that has never previously been done). He stresses the importance of continuity as well as change in both policy and character. I do not think that there will be any great shocks in his cabinet selection and he is likely to seek to balance interest groups. Indications as to when the elections will be held should emerge fairly quickly.

On the issue of Zimbabwe, over the next two years South Africa needs to resolve its internal domestic issues, including holding elections, forming the administration and allowing time for the administration to find its feet. Unfortunately I do not believe that in that time, South Africa will find in itself the political will required to become one of the actors dealing with the crisis. In my view this crisis has now gone beyond the level of help that could be offered by any combination of domestic forces backed an aid programme of reconstruction. In effect it is a failed state and needs international administration backed by UN, AU and other international actors to get to grips with the country.

With regard to the foreign policy of Jacob Zuma- it will become more introspective and I think it is unlikely to take an active leadership role either internationally or in the African continent. It is no bad thing if there is greater focus on domestic issues.

Developments in socio-economic factors

I think the balance sheet has many plus points – We have seen disciplined management of economy with macro-economic management policies that have allowed fourteen years of continued economic growth, the best performance for decades. Not only that but we also have low international debt, a sound banking system, cushioned by exchange controls and stringent regulation, and have run a deliberate budget surplus so are currently well positioned economically and do not need to go to the IMF, all of which means we are only suffering the indirect consequences of the current economic meltdown because the basic structure is quite sound.

However, the drop in the commodities cycle is of course exacting some immediate costs- some capital projects have already been cancelled and this inevitably is leading to increases in the rate of unemployment. We experienced good retail levels over Christmas but sales are now down year on year fairly significantly.

The Auto industry has been badly affected, which has caused unemployment elsewhere, not just in mining. This is now the subject of an emergency support package which is not going to be a conventional fiscal package of developed countries but will provide a way of ensuring that the infrastructural programmes are maintained and support programmes are in place to help the unemployed. Given the current level of unemployment, I believe at this stage that work of any description should be the goal, though with recognition of graduation from the informal to formal sectors. The current call for ‘decent work’ is only realistic at the ideological level.  I think it is a case of trade unions trying to protect those that are inside the net from those outside it, but there is a need for some form of employment for all.

One of the core weaknesses of our economy is the current account deficit which acts as a constraint on annual growth, but it does also ensure that in a time of falling food and energy prices, we do have a correcting mechanism in terms of the currency. This allows exports to become more competitive, and also indicates that there are checks and balances on the South African Economy. I anticipate that interest rates will drop and at a fairly fast rate which will also mean that inflation will come down a lot.

With regard to the 2010 Football World Cup, I am confident that preparations are on course and that it should be a successful, African event and culturally appropriate. A lot of thought has been put into its legacy and it is bringing people together who have disputes over other issues. Preparations are resulting in the upgrade of airports and indirect infrastructure and there are indications that the event will carry benefits beyond South Africa’s borders.

So the socio- economic risks do come from global environment, but also from the legacy of failures of the Mbeki administration. These failures are seen in the education, health, rural agriculture and crime sectors and are also attributable to corruption, poor performance of the civil service, patronage and even cultural mediocrity. They ultimately all stem back to a lack of accountability and a culture of interests of the party over that of the country.

Government Sectors

Education –Fortunately the sector has a competent minister but she is not helped by an institutional framework which has devolved powers to the provinces and a trade union that maintains incompetent teachers. The private sector has become extensively involved but we are self critical of our performance, we have put in a lot of resources but have thus far not had extensive impact and will continue not to do so until we attack some of the root causes of the problems.

Crime – This is a mixed picture with some steps forward, most importantly the road map to a new criminal justice system that was pioneered by the business sector has been taken up and is currently being implemented. The budget has increased, more policemen have been appointed and closer interaction between public and private institutions has led to performance enhancement. On the dissolution of the scorpions (specialised policing squad) and this together with various some corruption scandals has led to some underlying cynicism about the ruling party’s credibility on crime and corruption.

Health – The advent of Barbara Hogan has changed the tone of this sector, relations have improved with business and civil society and continued stalling in the governments HIV/ AIDS programmes is being cleared away with great energy. Overall the developments here have been very positive. There are of course now concerns over the Cholera spill over from Zimbabwe.

Energy– There have been some improvements since the black outs of last year. But there must be harder inst re-structuring and making pricing more cost reflective which will be difficult in the current economic times. A strong private sector has been bought in though and I am positive about this. The expansion plan for the sector will of course be difficult to finance in the current economic climate and will require much more innovative public- private partnership.

Telecommunications– There are some positive signs; broadband costs are set to come down dramatically and a number of cables are being laid. I believe that the much needed improved telecommunications are on their way.

Transport –This is very ably managed by Maria Ramos and a much improved working sector, though still with some work to be done.

To conclude, South Africa is better positioned than many of the emerging markets to deal with current economic problems. There are people of good will on all sides, and though success is not guaranteed, the opportunities are there.