NEWS & ANALYSIS

Ramaphosa's victory: Seven key issues

Gwen Ngwenya says the DA has been placed in an awkward position

Ramaphosa gets the green light, but must overcome history of inertia

Cyril Ramaphosa won the ANC leadership election with 2,440 votes, a 52% lead over his rival Nkosazana Dlamini-Zuma’s 2,261 votes. The last figures we released on 26 November gave Ramaphosa a 54% lead, based on data we had received from the Ramaphosa camp. Data we had received from the Dlamini-Zuma camp meant that our latest figures for her campaign going into the conference gave her a 57% lead. Both these estimates could not have been true at the same time, but made sense in the context of contested nominations and the various appeals processes that were underway. The final result does not display a significant variance with the numbers we had going into the conference, and suggests to us that the outcome is likely the reflection of a fair process.

Initial gains to be reversed

We anticipated that the markets would have a strong reaction to a Ramaphosa victory, and that assessment has turned out to be accurate. We further expressed the view that initial gains would likely soon be reversed as optimism gave way to reality. Our reservations about Ramaphosa’s ability to bring about long-term growth-friendly reform in this regard still stand. The following 7 points summarize our analysis at present of Ramaphosa’s successful presidential bid.

1. Low-hanging fruits for capital market, but not the real economy

There is an intimate link between the financial sector and the real economy. The availability and efficient allocation of capital is an important stimulus for economic growth. However, in order to be sustainable, the rise in financial assets must be accompanied by a solid "real economy" foundation. And the current market exuberance about Ramaphosa is not underpinned by any real economy indicators.

Headline events have been a prominent driver of South Africa's performance over the past two years. Well before the announcement of the ANC president, expectations of a Ramaphosa victory had pushed the Rand below 12.60, its strongest against the dollar in 9 months. Ramaphosa can do more still in the short term to improve business confidence and whet the appetites of investors making decisions on headline events; appoint a credible public prosecutor, institute an inquiry into state capture, bring in expertise and experience at struggling SOEs, etc, all without making a significant impact on the real economy.

Bagging such low-hanging fruit does still require strong resolve, and if there is little appetite to deliver these cosmetic solutions in order to restore market confidence, there is even less appetite to tackle the issues holding back the real economy. South Africa’s education system and transformation policies are a drag on productivity and the success of the real economy. Teacher absenteeism, lacklustre training, and union involvement in teacher appointments, among other issues, underpin poor curriculum coverage in schools, creating a constant stream of labour market entrants who are unemployable.

While the education system corrodes the country’s future supply of human capital, our transformation policies continue to treat the lack of economic inclusion as a demand-side problem. Demand-side transformation policy seeks to increase public and private demand for shareholders, managers and workers from identified groups. It does this through employment equity and preferential procurement policies and, surreptitiously, through competition policy. Misdiagnosing the structural problems not only means they do not get fixed, but that they are exacerbated. Race-based transformation policies have encouraged rent seeking and gate keeping as well as driving up costs and hampering productivity. For the real economy, those are the high-hanging fruits which must be plucked to get South Africa growing, and growing for all.

2. Unrealistic growth targets could underpin fiscal complacency

Ramaphosa's New Deal proposes a growth target of 3% in 2018. The risk is that overly optimistic growth projections could result in consolidation complacency should potential revenues generated by growth be used to support a rationale of sustaining the current expenditure trend. In the past, overly optimistic growth trends justified a relatively lax fiscal stance.

3. A compromised slate

A balance of political players from both warring factions might be a positive sign for internal ANC unity, but it does weaken Ramaphosa’s hand in dealing effectively with the party’s patronage networks and implementing policies that challenge the populist rhetoric of radical economic transformation along racial lines.

The ANC top six – president, deputy president, chairperson, secretary-general, deputy secretary-general and treasurer-general – are now split evenly between two slates.

Cyril Ramaphosa secured the presidency (defeating Nkozasana-Dlamini-Zuma by 2,440 votes to 261), the chairmanship (where Gwede Mantashe defeated Nathi Mthethwa by 2,418 to 2,269 votes) and the position of treasurer-general (where Paul Mashatile beat Maite Nkoana-Mashabane by 2,517 votes to 2,178).

From Dlamini-Zuma’s slate, David Mabuza was elected Deputy President (beating Lindiwe Sisulu by 2,538 votes to 2,159), Ace Magashule was elected secretary-general (beating Senzo Mchunu by 2,360 votes to 2,336) and Jessie Duarte was re-elected deputy secretary general (beating Zingiswa Losi by 2,474 votes to 2,213)

The possible dynamics flowing from this could go one of two ways; the 50/50 split could help engender a sense of unity, or drive up internal acrimony and division. It is likely the first key decisions and appointments Ramaphosa makes will determine which of these two possibilities is made real. Of those, establishing an uncompromising commission of inquiry into allegations of ‘state capture’ and his attitude towards the position of public prosecutor will help define his approach to corruption. In turn, how he sets about exerting control over the economy and fiscal policy, through positions like the finance minister, will be key indicators. Such decisions are likely to be the litmus test of how relations in the top six play out.

According to the ANC constitution, all top six positions serve at the behest of the National Executive Committee, which is where true organizational power lies. At the time of writing, the composition of that body was not yet known. If Ramaphosa is able to secure a majority on that body, it will go some considerable way towards nullifying the split nature of the top six.

From a provincial perspective, it is deeply significant that KwaZulu-Natal did not secure a single position in the top six, and Ramaphosa, who drew heavily on support from Gauteng (represented by Mashatile) is likely to draw great strength from that region. If he does, and the centre of power does move way from KwaZulu-Natal and towards Gauteng, his first order of business will be securing the province in 2019.

4. Ramaphosa victory disastrous for mature democracy

An Ipsos poll in May 2017 revealed that Ramaphosa was viewed favourably by 5.3 out of 10 eligible voters, a favourability score that placed him ahead of other political leaders, including those of opposition parties. Based on this and other polls, it is likely that, with Ramaphosa at the helm, the ANC will secure the 2019 election.

That the ANC is both the source and the solution of South Africa’s problems is the most serious threat to democracy. If the ANC wins in 2019, the party will not experience the ballot as a punitive judgement by the electorate, or as a measure of its rating based on performance. It is important that governance failures are not rewarded with electoral success if we are to create and strengthen the right incentives. South Africa’s electorate have at best doled out uneven sanctions at the ballot box for political parties who did not deliver on their promises, and at worst rewarded them for their failures. 

5. Consequences for ANC and the alliance

Ramaphosa’s election is likely to be beneficial for the alliance. Both Cosatu and the South African Communist Party supported his candidacy and, after relations had deteriorated to the point of outright hostility under Jacob Zuma, Ramaphosa – who has built a life-long reputation as a negotiator – is likely to be able to repair much of the damage that has been done and strengthen the alliance.

The SACP, for one, had recently hurt the ANC in a series of Free State by-elections, where it took a small number of important seats off the party in Metsimaholo. Ramaphosa will urgently seek to bring the SACP back into the fold, and secure a cessation of open electoral hostility. The same will be true in the case of Cosatu and the various factions that have split from it. Of these, he is also likely to want to bring Zwelinzima Vavi and his newly established Federation of Trade Unions into the alliance.

But as one set of internal relations can be better addressed by Ramaphosa’s election, another set of problems will have manifested. The ANC leagues – the Youth League, Women’s League and Veterans League – all sided with Nkozasana Dlamini-Zuma, and Ramaphosa is going to have to work hard to ensure they do not become unofficial platforms for the disenchanted and aggrieved in the way Cosatu and the SACP did under Zuma.

Restoring party discipline is one of the primary organizational problems Ramaphosa faces. It has totally collapsed and, for an organization that historically has prided itself on how strictly it adheres to the precepts of Leninist democratic centralism, Ramaphosa has not ever led with an iron fist, in the way Thabo Mbeki did. He is going to be hard-pressed to draw a line in the sand and restore an internal sense of institutional authority to the ANC collective.

6. Consequences for the opposition

The composition of the top six slate immediately gave both the DA and the EFF a means to define the ANC conference as morally compromised, and, in turn, as being unable to break cleanly with the Zuma regime. This is likely to their benefit, for it is true and, negates some of the difficulty that would have been caused had Cyril Ramaphosa’s slate dominated the top six, or if he had won by a significant majority. The opposition can now credibly claim that the ANC remains compromised.

It is a reality that will also temper some of the latent enthusiasm among the media and business for a Ramaphosa victory, which will be to the opposition’s favour. However, for the DA in particular, Ramaphosa is a figure grounded in urban, working and middle-class politics. Gauteng province is ground zero for the opposition and the ANC in 2019, and although the opposition will still be able to evoke the idea of Jacob Zuma, it will not be able to do so to the same degree it has in the past. Ramaphosa could well have the effect of forcing the opposition to begin driving harder policy differences between itself and the ANC in order to distinguish itself as an alternative. And if Ramaphosa is able to unite the ANC behind him in Gauteng, as well as personally resonating with voters in the province, he could well make all the difference in what is going to be a very close election.

7. A history of inertia

Before assuming office as deputy president, Ramaphosa made many promises, almost none of which have materialised. Ramaphosa promised to ensure the implementation of the NDP. In 2014, in his own words, he said the ANC was ‘on the cusp of implementation’; three years later we are presumably once again at that cusp. Furthermore, he promised to bring unity in the ANC, and spoke of the ‘decade of the cadre’ which was going to ‘inculcate the most outstanding values and ethics amongst the members of the ANC’. The corruption scandals which have beleaguered the ANC reveal that it has indeed been the decade of the cadre – at the expense of the public. But his well-laid out intentions amounted to nought, and, in fact, combusted in spectacular fashion, South Africa’s would-be saviour was not at the centre of the fire, stamping out the flames, but ever on the sidelines, doing nothing and saying nothing. In conclusion, the Ramaphosa of fantasy, the figure of a decisive man of action, has never manifest himself in reality.

We congratulate Cyril Ramaphosa on his win, and, like many South Africans, are hopeful. Hope breeds confidence – but we must reserve room for scepticism in order to minimise surprise.

Gwen Ngwenya is the chief operations officer of the South African Institute of Race Relations (IRR) – a liberal think tank that promotes political and economic freedom