Many interpreted President Ramaphosa’s appointment as the sun emerging from the dark clouds that troubled the Rainbow Nation’s economy and politics. Photo: Jikelo Phando/African News Agency (ANA)
Many interpreted President Ramaphosa’s appointment as the sun emerging from the dark clouds that troubled the Rainbow Nation’s economy and politics. Photo: Jikelo Phando/African News Agency (ANA)

Why South Africa, and why now? Materialised scenarios for the Ramaphosa presidency

By Lullu Krugel and Christie Viljoen Time of article published Feb 11, 2020

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JOHANNESBURG – In March 2018, in the wake of President Cyril Ramaphosa’s appointment as the head of state, PwC SA published a report entitled “Investment decisions: Why South Africa, and why now?”. Our research examined potential scenarios for the Ramaphosa presidency (2018–2022) and predicted five economic outcomes that could develop under the new president. So, which scenario has materialised?

Many interpreted President Ramaphosa’s appointment as the sun emerging from the dark clouds that troubled the Rainbow Nation’s economy and politics. The new leader of the African National Congress (ANC) campaigned for the party presidency in 2017 with an economic recovery plan based on his deep understanding of labour, business and politics. #Ramaprogress was born and consumer confidence spiked to the highest level since the Bureau for Economic Research (BER) started its current confidence series in 1982.

Initial progress

“The wheels of change are moving now, and they are going to start speeding up,” was the president’s pledge at the World Economic Forum (WEF) in Davos, Switzerland, in January 2018. Our baseline (most probable) scenario for progress under the new administration was encouraging. Here are the key factors envisioned for the ‘#Ramaprogress’ scenario back then:

  • President Ramaphosa’s 10-point action plan and New Deal agenda would be front-and-centre when it came to policymaking and communication with investors. The ANC was expected to show a renewed vigour and focus on national issues instead of party politics. A focus on job creation, economic growth and investment was evident, as was the prioritisation of turning around financially troubled state-owned enterprises (SOEs).
  • While President Ramaphosa would not make much progress by 2022 in the areas of education many of his other aspirations were set in motion. For example, interaction between labour, business and government under the auspices of the National Economic Development and Labour Council (Nedlac) grew from strength to strength. Social and labour unrest remained more subdued.
  • In response, business and consumer confidence returned to positive territory, and companies and households increased their consumption and investment expenditure. Foreign direct investment (FDI) improved alongside this rising sentiment. As a result, economic growth recovered to 2 percent by 2020 and 3 percent by 2022. A healthier pace of economic growth and improved administrative efficiency by the South African Revenue Service (SARS) boosted tax revenues and helped stabilise the fiscus.

In the two years since President Ramaphosa’s emphatic statement in Davos, there has certainly been a lot of turning of the wheels of change, as envisioned by this baseline scenario. Developments include finalisation of the new Mining Charter, resizing the cabinet, launch of the Youth Employment Service, two presidential investment summits, South Africa’s signing of the African Continental Free Trade Agreement (AfCFTA), and the removal of the birth certificate requirement for travel.

Failure to impress

However, failures and points of inaction have been all too numerous. These include deterioration in fiscal dynamics and sovereign ratings, an increase in economic, political and policy uncertainty, rising levels of gender-based violence, slow progress in resolving the land reform and expropriation issue, no high-level state capture prosecutions, worsening bilateral ties due to xenophobic violence, continued increase in irregular public-sector expenditure, and the deepening of financial and governance troubles at SOEs.

Unsurprisingly, the public is not impressed. Consumer confidence in the outlook for the economy has fallen back into negative territory alongside elevated economic, political and policy uncertainty. This is certainly not the scenario that President Ramaphosa was envisioning two years down the line when he won the ANC leadership race at Nasrec in December 2017.

Declining business confidence amidst rising uncertainty



The baseline scenario has clearly failed to materialise. Instead, our downside scenario - ‘Coming up short’ – is playing out. Economic growth has been disappointing and real GDP per capita growth — a measure of each citizen’s share of the economy — declined for a fifth consecutive year in 2019. Business confidence dropped to a 20-year low, unemployment climbed to the highest level since 2003, and the economy stretched a downward business cycle to the longest since records started in 1945.

Our downside scenario sounds all too familiar in the present tense. Here are the key factors of this scenario, which we outlined in March 2018:

  • Elements within his party and national government stifled President Ramaphosa’s reform ambitions. The expected business-friendly Ramaphosa administration was not as favourable as suggested by the president’s New Deal promises and the private business sector did not react positively to this policy trajectory. Business confidence remained pessimistic.
  • Economic growth remained significantly below potential. The country’s policy direction did not really address the triple challenges of poverty, inequality and unemployment. A key issue here was the need for changes to the labour market/relations between the private sector and labour organisations in order to encourage job creation at a faster pace.
  • South Africans grew tired of the situation. Because of this continued malaise, the ANC lost more support during the 2019 national elections but was able to retain a majority in the National Assembly. Nonetheless, weak economic growth (weighing on tax revenue) and pressure from labour unions (limiting expenditure cuts) resulted in further deterioration in fiscal dynamics.
  • President Ramaphosa had to shelve many of his New Deal ideas and the grand strategy joined the National Development Plan (NDP) in being a ghostly plan for resurrecting the Rainbow Nation. Continuing policy uncertainty in primary sectors hampered investment in these industries. Power and water utilities remained in financial and management doldrums.

In March 2018, we assigned a 20 percent probability to the ‘Coming up short’ downside scenario being realised over the ensuing five years. This has now increased to 50 percent and currently the most likely outcome.

On a positive note, South Africa has (so far) avoided a worst-case scenario, which PwC referred to as a ‘Mouldy mess’. In this scenario, economic growth potential is below 1 percent, multiple ratings downgrades follow, a messy coalition government would have taken control after the 2019 elections, and the rand deteriorates significantly. Apart from the coalition government element, the other factors in this scenario remain real risks that need urgent action in 2020 if South Africa is to get anywhere near the ‘#Ramaprogress’ trends that sounded so promising less than two years ago.

Lullu Krugel is chief economist at Strategy& PwC and Dr Christie Viljoen is an economist at Strategy& PwC.

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