The economic fallout caused by uncertainty around President Cyril Ramaphosa’s political future could shave off at least 1 percentage point in South Africa’s 2023 growth forecast due to the body blows on investor confidence.
This is a view of at least one economist who has warned that the political economy around Phala-Phala farmgate was still likely, in one way or another, to spill over into next year.
Investors are still digesting the news that Ramaphosa could be considering his resignation as the country’s president following a damning report that he may have violated his oath of office over his handling of a burglary in his Phala-Phala farm.
North West University’s Business School economist Professor Raymond Parsons on Friday said business and investors were already deeply worried about the scandal’s unintended consequences for investor confidence and consequent job-rich growth.
“Prolonged uncertainty might shave another percentage point off the SA Reserve Bank’s recent already low GDP (gross domestic product) growth forecast of only 1.1% in 2023, and growth may indeed even dip below 1% next year in an overall worse case scenario,” Parsons said.
Top officials within the ruling ANC have reportedly urged Ramaphosa to not resign as that would give ammunition to the radical economic transformation faction to undo all the work he has embarked on since taking office in 2018.
Investors would dread to see Ramaphosa leaving office as he has been instrumental in implementing structural reforms, fast-tracking the Just Energy Transition Programme, and the prosecution of long-standing State capture crimes, even though the deliverables of these projects have been slow.
Parsons, however, said no one was indispensable though on the economy many stakeholders saw Ramaphosa as irreplaceable for now within the current ANC context.
He said the enhanced risks to investment and growth arise from the extent to which Ramaphosa has been the visible ‘face’ of economic reform and pragmatism in his engagement with the investment community and business over several years.
“Even though there has been much criticism from business about the slow pace of implementation of projects and policies, the assurance has been that at least several things were broadly, if tardily, moving in the right direction under his stewardship. This is now in jeopardy,” Parsons said.
“The Ramaphosa Presidency has at least been embedded with hopeful reform plans and actions, which may not be shared or pushed to the same extent by putative successors.
“Hence the strict test that will therefore be applied by the markets and business in the period ahead will be whether the urgent necessary reforms will continue in the light of these developments and with a general election also pending in 2024.”
An independent panel commissioned by Parliament last week found that Ramaphosa may have an impeachable case to answer for allegedly transgressing foreign exchange and tax regulations, as well as flouting the Constitution.
The Section 89 panel chaired by retired Chief Justice Sandile Ngcobo said Ramaphosa may have a prima facie case to answer for not reporting the burglary where millions of rands in foreign currency were stolen at his Phala-Phala farm in Limpopo in February 2020.
It also found preliminary evidence that Ramaphosa may have violated his oath of office, may have contravened a section of the Prevention and Combating of Corrupt Activities Act, and that he should face further scrutiny.
“A serious misconduct in that the President violated section 96(2)(b) by exposing himself to a situation involving a conflict between his official responsibilities and his private business. of the Constitution,” read the report.
Ramaphosa’s mulling over quitting his post, and the ANC’s off-guard reaction to the developments, rattled the markets last week, especially stocks in the banking sector, with the rand retreating close to R18.90 to the dollar, shedding more than 2.2% against the greenback and erasing most of its recent gains.
Citadel Global director Bianca Botes also said on Friday that this debacle had opened up a whole new layer of risk for the struggling economy, and the local currency.
Botes said while Ramaphosa’s future hung in the balance, investors would now proceed to focus their attention on what the ramifications of this report would be, pondering whether he should be removed from office or not, and then, who his successor would be.
“Investors will take a particular interest in the policy stance of the successor and what that could mean for the country’s economic growth moving forward,” Botes said.
“The South African economy is already facing numerous economic headwinds. This political blow only adds to the pressure of an already fragile situation.”