Johannesburg - South Africa’s institutions are eroding under President Jacob Zuma and policy is losing its coherence, according to Goolam Ballim, chief economist of Standard Bank Group Ltd, the continent’s biggest lender.
Recent developments at the South African Revenue Service (Sars), which had been one of the government’s strongest institutions, are particularly concerning, Ballim told reporters in Johannesburg on Tuesday. A review of the agency’s work, following the suspension of several employees, is “troubling”, he said.
“The institutional fabric of South Africa is being unwound,” he said. “Institutional erosion seems to have been a hallmark of South African public life over the last couple of years.”
Several senior officials at the South African Revenue Service have been suspended since Zuma, 72, appointed Tom Moyane as head of the tax-collection agency in September. They were implicated in a probe into the existence of a covert unit within the agency that was engaged in intelligence work.
A lack of policy clarity is making the investment environment more unpredictable, Ballim said.
“Policy cohesion is at a shallower level than yesteryear,” he said. “The political climate does feature slightly more elevated than 10 or eight years ago in terms of shaping the overall investment climate.”
Zuma won a second term in office in 2014 with an economy struggling to rebound from a series of strikes and power shortages. He’s been criticised by opposition political parties and faced a probe by the corruption ombudsman for alleged misspending of public funds on renovating his personal residence.
For the ruling African National Congress, “one of its foremost strengths was its leadership, was its president”, Ballim said. “Under the current circumstances it would be quite difficult for the ANC to suggest that the president is its foremost strength.”
With politics playing a bigger role in public policy, the risk is higher of the ANC-led government adopting “populist choices” over “sage, long-term sustainably healthy economic decisions”, Ballim said.
Finance Minister Nhlanhla Nene has pledged to keep debt under control and narrow the budget deficit to 3.6 percent of gross domestic product in the fiscal year through March 2016.
At the same time, the government is facing pressure to increase support to state-owned companies such as South African Airways and Eskom Holdings SOC Ltd. The electricity utility has been promised a R20-billion injection from the government to help plug a funding shortfall so that it can continue building power plants to meet demand.
Nene is due to present updated forecasts in his budget speech in Parliament on February 25.
* With assistance from Rene Vollgraaff
Bloomberg