Spotlight on President Ramaphosa’s structural reforms during and post-Covid-19
JOHANNESBURG – The Covid-19 crises happen in a context when we have struggled to transform the economy for inclusive growth and a prosperous nation, especially state-owned enterprises (SOEs) that are set back by years of mismanagement, corruption and incompetence.
Many sectors such as the manufacturing sector has been in decline since late ’90s. Key SOEs that would have supported developmental efforts are neglected and some privatised to the demise of industries that depend on them in the value chains. The recent downgrades to junk status came as no surprise.
The private sector has been a co-conspirator with devastating corruption findings by the Competition Commission in recent years, as well as massive illicit flows and transfer mispricing that has eluded our revenue authority. These events have questioned to the core the governance prescripts that we are internationally respected for putting on paper.
But nothing stands out as ANC’s inability to resolve the structural reforms stalemate.
There is big elephant in the room in South Africa, the assumption that when economists and politicians talk about structural reforms, there is unanimity as to what that means; by that President Cyril Ramaphosa must get on with “structural reforms”. Traditional orthodox commentators, the so-called neo-liberalists view reforms from a prism of market liberalization, privatisation of the SOEs, and crowding in of the private capital in the market at all cost, maintaining a lean and mean government. These chaps are bolstered by the levels of governance failures and corruption in SOEs and their collapse, as well as recent ratings downgrades to junk status.
There is groundswell movement as a result of the Nasrec shift in the ANC with election of pro-business or market President Ramaphosa. With Finance Minister, Tito Mboweni’s colors nailed to the mast, it seems the President has a formidable team on his side.
On the other the traditional dissidents, the neo-Marxists see the role of the state in addressing developmental challenges as crucial and look at levers as SOEs and Banks or Central and State Banks in particular. From the 52nd ANC Polokwane Conference in 2007 the notion of a “mixed-economy within a Development State” gained momentum styled from Eastern inspirations such as China, Singapore, and Malaysia.
This emanated from disillusionment from key alliance partner about the GEAR and elitist Black Economic Empowerment (BEE) policies of President Mbeki era which resulted in “job-less” growth and fundamentally left the “racist-structure” of the economy intact. Within the ANC, the Radical Economic Transformation (RET) movers who were proponents of the “NDZ” (Nkosazana Dlamini-Zuma) in 54th ANC Conference in December 2017 in Nasrec have been muted by transpiring recent events, as being behind the so called nine-wasted years often branded as “Zuma years” of corruption and State Capture.
The December 2017 Nasrec election outcome of a victory of the CR17 (Mr Cyril Ramaphosa Presidency Campaign) was a compromise illuminating contradiction that saw the transcription of factions in the leftward “RET resolutions” and the election of the pro-business President. As we are often reminded that the ANC elective conferences appoint leadership that is suited to implement the conference resolutions. The NASREC outcome seems to have left President Ramaphosa, with his “neoliberal” crowd and business backers, an unenviable position where he needs to literally maneuver his reforms through the back-door.
With his allies in the SACP and COSATU subtly suffocating when Finance Minister Tito Mboweni publishes neoliberal policy papers, announces the slashing of the public sector wage bill; announce his preference to privatize SAA; and other market liberalization propositions contained in the paper; this indicate fragility and marriage of convenience between these original left-wing creatures and President Cyril Ramaphosa.
Leadership 101 will let us know that “leadership intent” is the hall mark that defines a leader’s tenure and how his/her success will be measured. Leadership intent is the ability of those who are tasked to lead to steer organisations or institutions they lead into a pre-defined destination, and rally everyone they lead into that destination. Leadership will leave no space for factionalism, victimhood, and negativity, but will inspire everyone to leave by the values of their destination, and contribute meaningfully to the efforts to arrive at the destination.
With a few exceptions, we’ve seen severe forms of poor leadership in all sectors of our societies over the past century not only in South Africa but in Africa as a whole that has denigrated our society to extreme levels of poverty, inequality, and unemployment. The Covid-19 it would seem will add another crisis on top of the intransigent structural reforms.
Major crises have the tendency to revive and enforce leadership. Students of history and leadership will tell you how crises events are brutal in exposing leadership weaknesses or strengths. Nancy Koehn, a historian at Harvard Business School, for an example has done some excellent work in analysing leadership during crises and has examined different kinds of crisis and draws on profiles of different leaders who experienced different stresses such as Ernest Shackleton, Abraham Lincoln, Frederick Douglass, Dietrich Bonhoeffer (an anti-Nazi German clergyman), and the 1960s environmentalist Rachel Carson. South African scholars will be well positioned to describe leadership characters in the face of the ongoing crises in our country.
The President, resuming his term as the fifth President of the democratic South Africa made a clarion call for “thuma mina” in what was to be known as a “new dawn” spelling a new era against corruption and state capture. This raised much required momentum to unleash a range of “structural reforms” in the economy.
While his government was contemplating the structural reforms key SOEs were getting out of hand threatening literal collapse in particular of SAA, Eskom, and Denel. He had to be pre-occupied with putting-off fires such as load shedding and governance collapse in these SOEs; personal legal woes out of public protector reports; and managing potential fall-out with radicalized “land expropriation without compensation” forces.
While managing those fires came in rudely in February unexpected the coronavirus crisis and concomitant downgrading by Moody’s and recently by Fitch and S&P. In his presentation of the Covid-19 stimulus package on the April 21, Ramaphosa contemplated a “new economy” to take advantage of the pause in the economy as a result of the Covid-19 crises to reimagine a transformed economy. By the “new economy” he hopes he can finally embark on much awaited “structural reforms”.
The key question is: are the ANC factions and its alliance ready for reforms? Which reforms are they ready for? This is the crux of the stalemate that has hamstrung the ANC governments and require a bold and aggressive departure by the current leadership. Whether you talk about part privatization of SAA, Eskom, and other SOEs, the fundamental obliteration from mainstream commentators in public is that the ANC government is mandated by its conference resolution to implement certain key resolutions. Among those critical we must mention in simple terms are the following:
- Create a State Bank,
- Nationalise the SA Reserve Bank
- Implement SOEs reforms making them key players in a developmental state
- Build state capacity
- Expropriate land without compensation
Will President Ramaphosa step-up and win the battle for structural reforms? The ANC needs to look at its constitution and find a way to resolve the question within a few days?
Dr Bheki Mfeka, is a Development Economist and Director at SE Advisory, and former advisor to the Presidency. He writes in his personal capacity.