Big ANC majority could usher in South African economic reforms

by Reuters
Monday, 5 May 2014 15:25 GMT

* ANC expected to renew large majority at May 7 election

* Zuma has chance to push through pro-business National Development Plan

* Plan could open infrastructure to private sector, subsidise youth jobs

By Xola Potelwa

JOHANNESBURG, May 5 (Reuters) - In the 20 years since apartheid, South African jewellery designer Nthabiseng Xaba has gone from bank clerk to state employee to thriving entrepreneur - just the kind of economic improvement story the government wants to promote.

Her success is testament to the progress made by the African National Congress (ANC) in its promises to lift millions out of poverty after the former liberation movement won South Africa's first democratic elections in 1994.

In particular, she praises Black Economic Empowerment, an affirmative action programme set up to give black South Africans a leg-up and redress the inequalities that apartheid had entrenched in what was then an insular economy.

"The new dispensation made it possible for people like me to leave the comfort of the corporate sector and explore our enterprising abilities," said 49-year-old Xaba, surrounded by sparkling beads and precious metals in her Johannesburg office.

"They introduced policies that ensured there is, for example, equitable access to the country's minerals, and funding structures favourable to start-up businesses belonging to people who were disadvantaged by the apartheid regime."

Polls suggest the ANC will maintain a near-two-thirds majority at the May 7 election, giving President Jacob Zuma a sufficiently strong mandate to brush aside the union and leftist allies that helped put him in office five years ago to the chagrin of the more business-oriented side of the party.

Zuma was indebted to the unions for the support they gave him during his ousting of former president Thabo Mbeki in 2007, but the labour movement has become divided in recent years, freeing Zuma from any obligations in his second and final term.

Although he gave no details, at a news conference on Monday he hinted at big changes to come.

"We need an overwhelming majority so that we can change certain things so that we can move faster," he told reporters. "There are things you need to remove so you can move faster. I won't be specific."


In particular, analysts say Zuma will be able to throw his weight behind the government's National Development Plan (NDP), a blueprint for economic growth over the next 20 years that has got the thumbs-up from investors but been attacked by unions.

Investment-friendly policies in the NDP include encouraging more private sector involvement in infrastructure projects and a youth wage subsidy aimed at helping youngsters into work. Both are strongly opposed by unions.

Most investors say the plan is crucial to South Africa's ambitions to lift economic growth from below 3 percent to 5 percent or more - a level that economists say is the minimum required to begin reducing a 25 percent unemployment rate.

"Even a 60 percent or 58 percent majority is huge. The ANC can still call the economic shots," said Colen Garrow, an analyst at Johannesburg-based consultancy Meganomics.

"Post-election, I think there'll be greater focus on the NDP and how we're going to achieve it. It's all market-friendly, at the cost of what the socialist movements want."

Since apartheid, South Africa's GDP has trebled in size as a modern, investment-grade economy has emerged to become part of the so-called BRICS group of emerging markets, along with Brazil, Russia, India and China.

Yet many critics argue that South Africa's economic development has been too skewed towards big business.

Already-large companies have boomed and firms such as Standard Bank and telecommunications group MTN are expanding across the African continent. But little of that growth seems to have trickled down to street level.

While top chief executives can earn up to 40 million rand ($3.8 million) a year, salaries that would not look out of place in more developed economies, this is a staggering 900 times the average wage of low-paid workers.

About 15 million of South Africa's 53 million people live on less than $2 a day, anti-government protests have been sweeping through black townships, fuelled by unemployment and a sense of neglect, and the mining sector is being choked by strikes.


The stubbornly high unemployment helps to explain why South Africa spends around 3 percent of its GDP on welfare grants, compared with around 0.4 percent in Kenya, while household debt stands at around 70 percent of income.

"That there's been some progress in many areas is a fair statement to make but, lest we forget, it is two decades," says George Glynos, managing director at ETM Analytics.

"We are still stuck with high levels of unemployment and inefficiencies. It's a story of lost opportunity."

Doing nothing, then, is not an option, and the government team that Zuma puts together will be crucial.

There has been speculation that the respected finance minister, Pravin Gordhan, may step down, although concerns about management of the economy would ease if he was replaced by former central bank governor Tito Mboweni, another investor-friendly figure touted as a possible successor.

Other appointments will show how much importance he attributes to the unions and the left.

"His choice of generals and foot soldiers ... will be the first decisive signs of the trajectory for South Africa in the next five years," Colin Coleman, the local head of investment bank Goldman Sachs, said in an editorial last week.

"It is this team that will need the credibility to lead the effort to close the gap between the haves and the have-nots."

The ANC also needs to stem the corruption scandals that dogged Zuma's first term if he is to regain the confidence of the business community.

Zuma himself was criticised in an anti-graft report last month for "benefiting unduly" from $23 million state-funded security upgrades to his private home that included a swimming pool, amphitheatre and chicken run.

"The ANC's performance and record is the barometer that the South African electorate will use to decide whether the 2019 election becomes another passing of the baton ... or the moment of reckoning for the party," Coleman said. ($1 = 10.4830 South African Rand) (Writing by Joe Brock; Editing by Kevin Liffey)

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