SA’s GNU: A fragile stability facing economic challenges – Katzenellenbogen - Biznews
Following the 29 May election, South Africa has moved from political uncertainty to a Government of National Unity (GNU) that’s somewhat centrist, reassuring to markets. Although the GNU faces internal tensions, it’s unlikely to fracture soon. However, its impact on economic reform might be limited, with incremental changes rather than sweeping reforms. The success of the GNU will hinge on its ability to address municipal crises and improve infrastructure amidst a challenging economic environment.
Jonathan Katzenellenbogen
The country is in a far better place than it was on the eve of the 29 May election. Prior to the election there was a deep uncertainty that, just maybe, the radical comrade parties, the Economic Freedom Fighters (EFF) and uMkhonto weSizwe (MK) might form a national ruling coalition with the ANC.
Today we have a Government of National Unity (GNU) in place that is somewhat centrist in terms of our politics and satisfactory to the markets.
Even with tensions between the ANC and the DA in the cabinet, it is unlikely that it will split apart. These two parties and some others have an uneasy relationship of mutual dependence on each other. If the DA and the Freedom Front Plus pull out of the Cabinet, that might make way for the EFF and MK to join. Julius Malema says he will not join the new government with what he calls ‘racist white colonial parties’.
The DA has to compromise on policy, because its overriding aim is to stay in the cabinet and keep the radical left out of the government. That means it needs to stay in the government and do what it can.
The parties are bound to test each other in this new arrangement. But will a coalition of the ANC and DA, as well as some others, emerge as the country’s almost natural governing coalition?
Basis for confidence
That would certainly offer a basis for confidence, but this cannot be guaranteed. If the GNU fails to generate growth and employment, a radical left coalition could be in place after the next election in 2029. That is a big reason why the GNU will have to make a tangible difference in people’s lives.
From all we have seen of the GNU so far, there will not be giant leaps in economic reform or a massive diversion from the ANC’s policies. It is highly unlikely that the “Minimum Programme” agreed to at the Cabinet Lekgotla earlier this month will be sufficient to turn around the economy. Reform is likely to be intermittent, slow, mostly crisis-driven, and insufficient.
The GNU’s “Minimum Programme” is far from the DA’s vision of reform, which includes privatisation of state-owned enterprises and scrapping of empowerment regulations and cadre deployment. The party has also called for changes in the labour laws and the industrial bargaining system, to enable more job creation.
In his speech at the opening of Parliament last week, President Cyril Ramaphosa managed to combine a commitment to ANC policy with signs of small bits of compromise. What has not been up for compromise is that the new government will still pursue the ANC goals of “empowerment and transformation.” That is what many of the vested interests in his party wanted to hear.
There is no sign that the throttling of the economy by public enterprises will be ended with privatisation.
And there were mixed signals of what might happen to the National Health Insurance (NHI) project.
Contestation
In his speech the President admitted to “contestation” around the idea of an NHI. Politically, the President cannot possibly back out of the NHI for reasons of pride and ideology. But he did say the government would be speaking to stakeholders “to resolve differences and clarify misunderstandings.”
This will be a big test for the DA and other parties in the Cabinet. Come the next national election, many of their voters will ask them why they did not stop the NHI when they were in Cabinet meetings.
The three declared priorities of the new government are what they call in the US, “motherhood and apple pie.” Who is not in favour of inclusive growth, poverty reduction, and building an ethical and developmental state? And who does not want a turnaround in crisis-hit municipalities and a massive rise in spending on infrastructure?
But even with these priorities, the President is having to watch his back and signal to the ANC that he will not give much away in the GNU. The growth “must be transformational,” he said.
And: “inclusive growth must drive the redistribution of wealth and opportunity.”
Need for change
With municipalities in crisis across the country, the ANC is now awake to the need for change. The ANC must be petrified that if the precipitous decline in municipal areas continues, it will lose control of many urban areas after the local government elections in two years’ time.
So, the ANC is now willing to change in the face of a crisis and give up cadre deployment to try to bring about a turnaround in urban areas “We will put in place systems to ensure that capable and qualified people are appointed to senior positions in municipalities, and ensure regulation and oversight of the appointment process.”
Read more: A big test for the GNU cabinet is coming: Katzenellenbogen
In the face of municipal crises, it is also prepared to use a ‘get tough’ approach, with what is tantamount to direct rule of local governments from the Presidency. In eThekwini, a Presidential Working group is working with the national and provincial governments to fix water and sanitation problems.
A massive rise in infrastructure spending is a worthy goal and one which can unite the GNU. Much of our road and rail network, many of our water treatment plants, and Eskom’s coal-fired generating stations have been crumbling for years. One problem is how the government will finance this massive increase in investment. Due to the existing burden of public debt, the size of its budget deficit, and the commitment to pay grants, the ability of the government to finance new projects is very limited.
Regulations
The President mentioned that regulations for public-private partnerships will be simplified to encourage infrastructure investment. Public enterprises, like the now troubled Eskom and Transnet, have in the past played a large role in building up the country’s infrastructure. Allowing them to be partners of the private sector might sound good, but excessive regulation and political interference are a turn-off for investors.
There are very often problems with rapid and massive increases in infrastructure spending. One is that the quality of projects tends to decrease the longer such programmes continue. And in South Africa it is likely that new and local corruption opportunities may arise, driving up the cost of projects. Another problem is that despite promises to crack down on the construction mafias, an infrastructure programme might offer them new lucrative opportunities.
The big achievement of our new government will be in protecting us from the radical left parties. It might also achieve a partial turnaround in municipalities and in managing aspects of government business. But there can be little hope that it will inject rocket fuel into the economy.
Jonathan Katzenellenbogen is a Johannesburg-based freelance journalist
This article was first published on the Daily Friend.