‘No matter what happens in December, SA likely to remain on low-growth path’
The outcome of the ANC’s December elective conference is unlikely to change SA’s slow-growth trajectory, the Bureau for Economic Research’s Hugo Pienaar told the Inclusive Growth Summit.
The ANC’s elective conference is less than a month away. The frontrunners for the party presidency are Deputy President Cyril Ramaphosa and MP Nkosazana Dlamini-Zuma, who has been endorsed by President Jacob Zuma.
Pienaar noted that the South African economy had closely tracked global growth patterns post-1994, followed the world into a recession in 2008, but had since lagged behind the global recovery.
While the ANC elective conference was a critical event being watched by South Africans and the global investing community, he said, there were too many uncertainties to say for sure which way the conference would swing, if it took place at all.
"Regardless of which candidate wins, the economic outlook will remain constrained. Confidence can move either way depending on the outcome of the conference," said Pienaar.
Pienaar said the financial markets and business confidence were bound to show a negative reaction initially if Dlamini-Zuma were to succeed Zuma.
On the other hand, if Ramaphosa won, the markets and the domestic investors could react positively immediately.
But "the question will be whether he will follow through on the positive sentiment in the initial phases".
The economic policy reforms that SA needed would not be likely in the long term, Pienaar said, leaving the economy to perform as it had in the past five years.
"A concern is that one faction’s narrative is radical economic transformation. Many would agree that transforming the economy [is needed], but what follows is how to go about doing that.
"Dlamini-Zuma’s remarks are vague when discussing this, so it is unclear if she would be able to effect reforms," he said.
The potential for downgrade after a Dlamini-Zuma victory was significantly higher than if Ramaphosa won, he said, owing in part to the fact that the international investment community was expecting a Ramaphosa victory.
The nuclear power programme and other factors could come into consideration in rating agencies’ decisions in their next credit rating reviews of SA.
"We need improved leadership. It won’t be the be-all and end-all but we can’t do much from the fiscal point of view to stimulate the economy at the moment.
"The likelihood of economic reforms in the future is quite remote, regardless of who wins in December," he said.
The Inclusive Growth Summit was organised by the Bureau for Economic Research, Economic Research Southern Africa and the Research Project on Employment, Income Distribution and Inclusive Growth.