Thursday, February 20, 2025

My latest Political Risk Alert to clients regarding the postponement of the Budget

Alert No 03 /2025      20 February 2025

 

Some likely consequences and conclusions arising from the postponement of the Budget

A number of possible conclusions and consequences may follow the unprecedented postponement of the Budget presentation in Parliament yesterday, both political and economic.


·         GNU fragility: Politically, the affair once again showed up the fragility of and divisiveness in the Government of National Unity (GNU), the tendency of the African National Congress (ANC) to think it can make important policy and legislative decisions on its own without properly consulting the other parties, and the resultant need to vastly improve the GNU’s mechanisms for multi-party consultation, cooperation and achieving consensus on contentious and divisive issues. Without it, the GNU could eventually collapse in disagreement, paving the way for radical leftwing populist parties to step into the void.

 

·         Last-minute politicking: The above is further illustrated by the fact that according to Parliament itself, the Budget process takes about 14 months to complete from start to final approval. Which means the GNU parties had ample time to negotiate the proposed 2% VAT increase or any other contentious issues or disagreements instead of leaving it to the very last minute after Finance Mininster Enoch Godongwana was already supposed to have started his Budget speech yesterday. This suggests that party-political politicking and brinkmanship took precedence over the interests of the country. It also created an unnecessary atmosphere and perceptions of a major crisis that led to more policy and governance uncertainty with resulting negative movement in the markets (see below).

 

·         Negative perceptions for ANC: Politically the ANC got plenty of egg on its face – Godongwana’s proposed 2% increase in the VAT rate would have demonstrated to many South Africans that despite the ANC’s hiding in last year’s elections, the party still does not put their interests first and cares little about the enormous plight of the poor. The Democratic Alliance (DA) will seek to gain maximum benefit for itself from such a perception, as will opposition parties like the Economic Freedom Fighters (EFF) and uMkhonto we Sizwe Party (MKP).

 

·         ANC Alliance tensions: It is not among the parties of the GNU alone that this has caused further divisions with some parties very reluctantly accepting the postponement as they did not really have any alternatives; COSATU rejected the ANC’s 2% proposal, while the SA Communist Party (SACP), the ANC’s other formal ally, has objected to it not having been consulted by Minister Godongwana while he did consult the DA and all other GNU parties. All parties were also given the opportunity to attend a consultative meeting of whips in Parliament prior to the postponement. The SACP is not represented in Parliament but prefers embedding its members in the ANC.

 

·         Government out of money: At the economic level, the affair again confirmed that the government is running out of money as well as options to secure additional revenue – it was basically limited to a choice between more borrowing (with an already worrying debt situation hovering) or raising more taxes (which led to the 2% VAT proposal).

 

·         Commitments and obligations: It also raises serious questions over the government’s ability to honour all its financial obligations and commitments in a crisis situation, which could see a number of vital government functions coming to a standstill or being seriously impacted, particularly affecting civil servants’ wages, and sectors such as health, education, social support grants, police and defence and much more. Effectively such a situation could cause a government shutdown.

 

·         Drop in GDP – bigger crisis: There are concerns that failure to agree on a Budget against a background of spiralling spending and limited fiscal options, the country may face another further significant drop in GDP and an even bigger crisis in the longer term. The South African motor manufacturing and agriculture industries, among more, could suffer serious setbacks if South Africa is kicked off the African Growth and Opportunity Act (AGOA)as threatened by Donald Trump. This, coupled to an irresponsible VAT increase that could trigger social unrest, the high level of municipal debts, and the many other ills facing the country, together with a Budget deadlock, could plunge the country into further crisis where unemployment and poverty may worsen, and GDP may fall. However, the political parties of the GNU have in the past demonstrated resilience to adversity and an ability to overcome such setbacks, and it is very likely that they will again come together around securing a more positive result. The threat, however, remains.

 

·         Reaction in the markets: The postponement of the Budget presentation also led to notable negative reactions in both the financial markets and the value of the rand. By early this morning, the rand had weakened by approximately 1% against the US dollar, trading at R18.57 from an earlier R18.33; the Johannesburg Stock Exchange's (JSE) Top-40 index experienced a decline of about 0.5%; and the postponement had triggered the sharpest selloff in the country's government bonds since December, with the 2052 maturity down as much as 1 cent.

 

·         Policy & implementation uncertainty: This postponement has also again  raised concerns about policy uncertainty, implementation delays, and investor confidence at an already precarious time for South Africa. Such political discord and fiscal uncertainty could further impact South Africa's economic stability and market performance, with parallel impacts on its political performance and stability.

 

·         More negative optics internationally: Coming so shortly after the negative publicity surrounding South Africa’s stand-off with Rwanda over the war in the eastern DRC, the controversy surrounding the Expropriation Act, and the Trump Administration taking aim at South Africa over its domestic and international policies with threats of punitive financial and economic measures, the optics created by the Budget postponement further paints South Africa in a very negative light with investors, trade partners and others. It may be causing significant damage in this regard.

 

·         Crisis management: The sum-total of it all is that President Cyril Ramaphosa is increasingly seen as a beleaguered president with little room to manoeuvre, while the GNU that came to his rescue last year remains divided and increasingly seems to be engaged in crisis management. In the meantime, growth, employment and poverty eradication continue to be the victims. Political stability could soon be added to this list if care is not taken.

 

Stef Terblanche

Political Analyst

 

Thursday, November 21, 2024

By denying reality the SADC’s special Harare summit did nothing to help improve regional stability and peace

 

The Southern African Development Community (SADC) has just concluded its Extraordinary Summit of Heads of State and Government in Harare, Zimbabwe – yet another mostly useless talk shop that once again ignored some of the region’s biggest problems that have directly impacted South Africa. Very little if at all any throughput and follow-up action is expected from what was essentially a self-indulgent talk shop and cocktails-sipping occasion. It also wouldn’t have done much to support President Cyril Ramaphosa’s Africa-centred crusade at the far bigger G20 summit.

 

Not too many actual heads of states/governments turned up to attend the Harare summit it seems, despite being billed as being held for them. Instead, they sent representatives in their place – a demonstration perhaps of their own low regard for the SADC organs and events as an institution trapped in its own truth-denying paralysis.

 

South Africa reportedly sent Deputy President Paul Mashatile – understandable as President Ramaphosa was away in Brazil for the G20 summit where he had much bigger fish to fry – a prestigious international stage versus a hardly noticed little regional talk shop, while at the G20 summit the company was also quite a few notches more important (and wealthier) than in Harare and the news TV coverage immensely better – things that most politicians covet.

 

The biggest takeaway of the underreported Harare event was not what occurred there, but rather that which was not even officially on the agenda – Mozambique and Zimbabwe, and quite a few other things too. With Zimbabwean President Emmerson Mnangagwa hosting the Harare event, his country and his authoritarian government’s many sins and threats to regional stability, economic growth, human rights and democratic freedoms were never going to be on the agenda anyhow given the SADC’s appalling track record on that one.

 

And those few media that did report on the summit, got it wrong, like a major German news channel which reported that the summit focus was on post-election unrest in Mozambique when, in fact, it was on the situation/peace-keeping mission in Eastern DRC, which was the officially stated reason for convening the Harare summit in the first place. Perhaps an African sub-region is not important enough in the global scheme of things for a major international media outlet to even get its facts straight. Maybe, and sadly, they don’t know the two countries apart. But then again, the SADC secretariat apparatus should perhaps blame itself for that.

 

If an African regional bloc like the SADC cannot even get its own act together and generate better credibility for itself, few of the big guns at the G20 were likely going to take President Ramaphosa very seriously when he once again pleaded for Africa to have a bigger say and more clout in global events by “reforming” international institutions like the United Nations. Which is a pity. Not only the SADC, but also the coup-riddled West Africa where Russian mercenaries now rule the roost in cahoots with their illegitimate African military paymasters, and the many conflicts, atrocities and radical Islamic insurgencies causing untold grief in eastern and north-eastern Africa and Horn of Africa countries and regions like Mozambique, Sudan, Somalia, Tigray and Eritrea, are more nails in that coffin.

 

And for Elias Magosi, the SADC Executive Secretary to say the region is generally calm and stable with only isolated insecurity in the DRC, as reported by the SABC, is an embarrassing and outright lie. Far from being isolated, the situation in Eastern DRC directly involves several neighbouring countries; necessitated an international peacekeeping force; has grossly destabilised the DRC itself and continues doing so; and until very recently still claimed the lives of South African soldiers among those from other countries. Perhaps the hapless Magosi has just become immune to the impacts on the region after so many years of indiscriminate bloodletting, human rights abuses, political abuses and instability, or he lives in a fool’s paradise.

 

Neither is the region “generally calm and stable”. Mozambique is plagued by a bloody Islamic insurgency in the north that has displaced thousands of people and brought in military forces from several countries, including South Africa, while bringing to a standstill the gas fields that could lift Mozambicans and even the region out of poverty (it its proceeds are not stolen by the ruling elite).

 

Furthermore, Mozambique has been wracked by domestic turmoil and protests as thousands of its citizens dispute the outcome of the recent elections they say had been rigged to illegitimately return FRELIMO and its presidential candidate to power after their many years of misrule, corruption and oppression on the heels of their brutally enforced and immensely failed socialist experiment under the late Samora Machel. With the Lebombo border incident, these protests also directly impacted South Africa. But instead of condemning this situation and proposing some corrective intervention, the SADC Organ on Politics, Defence and Security Co-operation congratulated FRELIMO on its “victory”. This is an indictment not of the SADC as an abstract geopolitical entity but of each of the member states in their own right.

 

In neighbouring Zimbabwe, the ruling ZANU-PF’s decades long disregard for human rights, democratic freedoms, fair elections, and its brutal repression of the opposition and high levels of corruption and economic mismanagement, have all but brought economic growth and development to a standstill with millions of food-starved Zimbabweans trapped in poverty. In both instances a direct consequence has been a flood of illegal immigrants coming to South Africa (and to other regional countries) where they now have become an “issue” and a cause of domestic political conflict.

 

Perhaps these are some of the things the SADC could better spend its time, energy and money on as part of entertaining the real truth of the regional situation. A summit that gets to grips with that, would be time and money well spent.

Tuesday, October 29, 2024

The GNU and foreign policy (from my Monday Briefing 28 October 2024)

 

The potential makings of debilitating tensions and possible collapse in the GNU – After the Government of National Unity (GNU) got off to a seemingly good start these past few months – strengthening investor confidence and the rand and injecting new optimism about the economy – it seems at this stage it would be wrong to let euphoria cloud our better judgement on the GNU (just as Ramaphoria once led the entire country up the garden path). It’s going to be a rocky road to longer-term success, if success comes at all for the GNU. There are still a number of very sticky points to be resolved: the BELA Act clauses to which the DA and others object; the National Health Insurance scheme; who makes and speaks on policy on behalf of the GNU; and implementation of the conflict resolving mechanism supposed under Deputy President Paul Mashatile’s command. But the biggest and most unexpected threat right now, comes in the form of contradictory foreign policy interpretations and views – these could quite easily yet become the stick that will break the GNU camel’s back. That is, within the context of seeking consensus on important decisions and having deadlocks untied by the built-in dispute mechanism chaired by Mashatile.

 

Further context involved is the question of who can make what policy statements on behalf of the GNU. This illustrates the difficulties experienced by parties in the GNU to become accustomed to the new rules and work within such unfamiliar parameters – it’s still very much a learning curve. However, there may also be hidden agendas at work, particularly in respect of an ANC that finds it difficult to accept that it can no longer unilaterally call the shots. The ANC is rather mischievously imposing its own foreign policy programme without consulting the other parties or accommodating their views. It has done so when President Ramaphosa told Russian President Vladimir Putin at last week’s BRICS summit that South Africa viewed Russia as a valued ally and friend who “supported us right from the beginning, from the days of our struggle against apartheid”.

 

The ANC also unilaterally pushed its own foreign policy agenda when it insisted it will not change its position on Palestine and Israel, with International Relations and Cooperation Minister Ronald Lamola (ANC), saying South Africa’s memorial, or substantive charge sheet of facts to be filed with the International Court of Justice (ICJ) today, contains more evidence, in “forensic detail”, to show that South Africa had not just put a plausible case of genocide before the court, but that it could now prove that it was indeed genocide. This contradicts the views of several other GNU parties. It also contradicts the ANC’s own “non-alignment” foreign policy. And it contradicts an earlier declaration by Lamola and supported by all GNU parties that South Africa’s foreign policy would in future be determined by what was best for the economy and its growth. By that it was understood that future foreign policy, among other things, would not antagonise South Africa’s major trading partners, particularly Washington and the US Congress where moves had already begun to isolate South Africa in retribution for its support to and close relations with Russia, China, Iran, Hamas and others.

 

   DA leader and GNU agriculture minister John Steenhuisen is quite correct in objecting to Ramaphosa’s statement to Putin, made on an international stage, about Russian friendship and support. In the first instance, it was a unilateral ANC foreign policy pronouncement that failed to seek prior support through consultation from other GNU parties and as such flouted the commitment to seeking maximum consensus on policy and other issues to which all GNU parties had signed up. It may not always be a very practical commitment, but it is a commitment nonetheless without which the GNU will fall apart. As it is, a number of GNU parties have no love for Russia after its invasion of Ukraine.

 

Secondly, it is a party matter for the ANC and not a government issue to which the whole country can be tied, as Ramaphosa did. It was the ANC and certainly not South Africa that had historical friendship and support relations with Russia as part of the former Soviet Union, and while the ANC may view Russia as a current friend, much of South Africa doesn’t. For the record, the ANC had such relations in equal measure with Ukraine when it too was still part of the Soviet Union, yet the ANC now tends to recognise only Russia in this respect. Thirdly, Steenhuisen was also correct in saying Ramaphosa could have made a more pragmatic statement so as not to again antagonise South Africa’s major trading partners. There is still legislation pending in Washington that could have highly negative consequences for South Africa. Ever since the mysterious midnight visit of a Russian ship to Simonstown and South Africa’s very public and obvious favouring of Putin and Russia to Ukraine’s detriment, the ANC has been pursuing a foreign policy that is potentially most harmful to South Africa.

 

And fourthly, this kind of policy jostling is dragging other countries and issues into South Africa’s domestic GNU battles. For one, DA Home Affairs Minister Leon Schreiber, in an obvious retaliation to Ramaphosa’s pro-Russian statement, declared on social media on Sunday, just days after the BRICS summit, that he had signed a “historic” agreement granting visa free access to South Africa for Ukrainian holders of diplomatic, official and service passports and vice versa. This comes on the eve of Minister Lamola hosting a Ukrainian delegation, very much minus the publicity and fanfare usually reserved for Russian visits. Schreiber’s made his statement only for Ramaphosa’s spokesman Vincent Magwenya to repudiate Schreiber and question his actions, saying that Ramaphosa had not yet given his consent to any such signing.

 

To add insult to injury, Schreiber had used the exact same words that Ramaphosa had used in respect of Russia, to describe South Africa’s “historic” relationship with Ukraine. Schreiber’s words: “We continue to see Ukraine as a valued ally, as a valued friend, who supported us right from the beginning, from the days of our struggle against apartheid, right through to now.” And Ramaphosa’s words to Putin (for comparison): “We continue to see Russia as a valued ally, as a valued friend who supported us right from the beginning, from the days of our struggle against apartheid”. While this may be seen by the two parties as the DA throwing down the gauntlet to Ramaphosa and the ANC, Ukraine certainly doesn’t deserve being treated like some geopolitical football by a small African country thousands of miles away from the already unbearable pressures it has to endure in its resistance to Russia’s bloody invasion.

 

At the same time as all of this played out, there seems to be a tendency in the ANC that it can wear down its former opponents who are current “allies” in the GNU in the longer run by tying them into the GNU with positions, perks and delusions of power, while simply continuing to call the shots and promote ANC policies. A stubborn DA which wants to exercise its own maximum measure of power and important decisions in the GNU, of course won’t stand for it. And the other 8 GNU parties are caught up in the middle. The result will be growing tensions if they are not careful, that will ultimately cause the collapse of the GNU, because without the DA and its support numbers there, the GNU will become a weak and toothless institution and will lack the numbers to push important decisions through Parliament, even despite it most likely then inviting the EFF to join the GNU. This a developing story and potential threat to the GNU.

 

Wednesday, August 7, 2024

Zuma and the MKP… a political juggernaut whose expulsion could further threaten the ANC

Article written for Democracy Development Programme and posted on their website on 6 August 2024.


My latest Political Risk Alert to clients regarding the postponement of the Budget

Alert No 03 /2025      20 February 2025   Some likely consequences and conclusions arising from the postponement of the Budget A numbe...