EDITORIAL: Ramaphosa fans flame of hope
The importance of the president unambiguously backing the economic reform plan can’t be overstated
It’s often said that the wheels of government are slow to turn. It’s about six weeks since finance minister Tito Mboweni stunned the ANC and its allies with the release of his economic strategy for the country.
With all the debate around it since then, the one voice that wasn’t heard, until this week, was the most important.
Seeing that the strategy document was sent to cabinet before its release, the assumption was always that it had President Cyril Ramaphosa’s tacit approval. But he had been remarkably quiet on where he stood.
The document made far-reaching recommendations on a variety of policy areas that are seen as crucial for the performance of the economy and was widely welcomed by a business and analyst community crying out for some direction in the face of a stagnant economy and dwindling confidence. Many recommendations, though, were controversial, particularly to the ANC’s allies — recommending, for instance, a loosening of labour market regulation and the sale of Eskom power stations.
Silence from the highest land in the office meant that any optimism about the strategy would be muted as it raised the question of whether political opposition from the allies would be enough to ensure that it never saw the light of day.
The importance of Ramaphosa unambiguously and publicly backing the plan therefore can’t be overstated. It would lift his presidency, and give people a sense that he is at last imposing himself on his fractured party and will indeed have the political will to push through the necessary reforms.
Who knows, if he showed real intent and came up with credible solutions on Eskom and the country’s dire fiscal position, it might just be enough to save the country from a damaging Moody’s Investors Service downgrade to non-investment grade.
On Wednesday it appeared that Ramaphosa had finally spoken. Delivering his opening remarks at the first meeting of the presidential economic advisory council at Tuynhuys in Cape Town, Ramaphosa said that if implemented the reforms would go a long way to restoring confidence and credibility. He said the proposed initiatives would provide hope that average economic growth could be lifted.
At the same time, September business confidence showed some lift from a 34-year low the previous month. What was more significant was the commentary that went along with it, suggesting that the gloom in sentiment had reached a trough and that a recovery could be sustained if the government actually followed up on what it said it was aiming to do.
Even on Eskom, there are some signs of optimism after the government published 28 conditions that it said the utility must meet to be eligible for additional state support.
On this it’s understandable that some will be sceptical. Government has always indicated that Eskom is too big to fail, meaning that it’s hard to see, despite his best intentions, what leverage Mboweni has over the company. Knowing that government can’t afford to let the lights go off, what incentives do the managers have to follow through on any promise they make?
Perhaps the idea that government will hand over the cash no matter what explains the improved performance of Eskom’s bonds.
But it wouldn’t be Ramaphosa’s government if a positive, confidence-boosting step wasn’t also accompanied by something in the opposite direction.
On Thursday, he flatly rejected one of Mboweni’s standout proposals, selling some of Eskom’s power stations to wipe out some of its debt. Bizarrely, he also described Eskom’s power stations Medupi and Kusile — which remain under construction and are flawed and massively over budget — as “crown jewels” which could not be sold.
That’s been a problem with Ramaphosa’s presidency in general.
You never know what you are going to get. He says different things to different people and can’t decide who he is: a decisive leader ready to take action to right what went wrong in the past decade or a hostage to internal party politics who’s prone to putting his head in the sand.
The country needs the former.