There’s no question that markets got way ahead of themselves in anticipation of a Cyril Ramaphosa victory in the ANC elections, driving up the rand to euphoric highs.
The currency pulled back to an extent once it became clear that Ramaphosa’s success in winning the ANC presidency was a compromised one, with a divided and potentially poisonous top six party leaders.
Disputes over the count ought to make investors sit up and take notice, but for now, the wave of optimism persists.
That is despite a sobering note from ratings agency Moody’s on Monday, which came as a reminder (in case anyone had forgotten) that SA was still on watch for a downgrade. It is the last of the ratings agencies that has us on investment grade and it had been holding out to see which way the ANC conference went.
Its verdict is less than fulsome. Ramaphosa’s victory "opens up the tentative prospect of a shift in policy and a rise in business confidence that could reverse the gradual deterioration in SA’s credit fundamentals".
But though Moody’s analyst Zuzana Brixiova cites the market-friendly reform priorities Ramaphosa outlined in his campaign speeches, she says sceptically, "it remains to be seen whether such high-level objectives will actually bring about change".
That is surely the nub of it. The top six split tends to dash hopes that President Jacob Zuma will be recalled and Ramaphosa and his supporters will be able to put in new leaders who could take the reform process forward. That could mean another 18 months of a Zuma presidency, during which huge further damage could be done to the economy – the poison pills have already begun with Zuma’s weekend higher education free-fee announcement and there could be more of them in coming months.
But making reforms happen would be tough even if Ramaphosa had a more commanding lead and a more unified team.
He needs to signal, sooner rather than later, what he is
going to do, or at least put heavy pressure on the government to do, to tackle the most urgent of the crises facing SA’s economy.
Top of the list surely has to be the state of the state-owned enterprises, particularly Eskom.
One of Ramaphosa’s campaign promises was reform to the governance of state-owned enterprises by appointing credible boards and CEOs. Such reform features too in Finance Minister Malusi Gigaba’s 14-point plan to turn around the economy. And it is one of the items on the top of Moody’s list.
But promises from Ramaphosa or Gigaba ring hollow when Public Enterprises Minister Lynne Browne clearly has no interest in good governance at the state-owned enterprises under her stewardship. Commitments to reform are not going to cut it when Eskom is running into a liquidity wall and faces the prospect that it could default on its debts, potentially triggering fiscal and financial crises for SA.
Ramaphosa and, indeed, the ANC have to take control of this one and speedily.
The fiscal mess is urgent too, with just weeks to go to the February national budget. Finding the spending cuts and tax hikes needed to narrow the deficit, get fiscal consolidation back on track and avert a downgrade was going to be hard enough on its own. Now Zuma has added R12bn to R15bn to the burden by way of higher education costs.
Wage negotiations with public servants could add even more. Ramaphosa and his colleagues need to get some sort of handle on this one too if they want to take over a public purse that is worth anything.
Another crucial signal relates to mining where investment in the industry has been destroyed by Mineral Resources Minister Mosebenzi Zwane’s mining charter moves and where many more jobs could be lost in months to come. Stopping the rot and plunder here too is an urgent priority.
Those are some of the immediate priorities: getting growth and jobs going in the medium to longer term will require much more. When the conference is over, that work must begin, but Ramaphosa’s victory will be worth something only if he can intervene urgently to halt the slide.