Power struggles within the ANC are likely to hinder President Cyril Ramaphosa from implementing his reform agenda and turning around SA’s battered economy.
With deep factional divides in the party, it seems Ramaphosa does not have the upper hand and is being undermined at every corner by those seen to be aligned to his predecessor, Jacob Zuma, who are alleged to be fighting against his attempts to reform the state.
“The real concern is that this power struggle may distract government from implementing the policies that the dissident faction is clearly resisting and that means more low, or even negative, growth numbers down the line,” NKC political analyst Gary van Staden said.
Conflicting comments about the Reserve Bank, for example, have shown just how deep these divisions are. The faction aimed at discrediting and undermining Ramaphosa's administration and his reform agenda is led by Zuma proxy Ace Magashule, who is the ANC’s secretary-general.
Magashule allegedly doctored an ANC statement to include controversial remarks that a party national executive committee lekgotla had resolved to expand the mandate of the Reserve Bank to include growth and employment as well as look at quantitative easing.
Ramaphosa had to walk back Magashule’s comments, saying the party would not change the Bank’s mandate because this was not prudent given economic and fiscal conditions.
Infighting will be a further blow to an already weak growth outlook. The economy contracted by 3.2% in the first quarter of 2019 after the country experienced its worst bout of power cuts. Data in the past few weeks have quelled fears that the country will fall into a second recession in two years but the outlook remains grim.
Last week the Reserve Bank revised its growth forecast for the year down again — this time to just 0.6%, almost less than a third of the Treasury’s expectations of growth of 1.5%.
This bodes ill for Ramaphosa who was elected on a ticket of reform and economic growth.
While markets have largely been driven by international events such as global trade tensions and Brexit, there are concerns about conflicting comments from the ANC which have wiped off some of the shine of Ramaphosa’s election just two months ago.
If Ramaphosa loses political capital, the rand will likely take a knock and he will find it difficult to deal with the challenges at state-owned entities, particularly at Eskom.
“The rand will react to any political developments, particularly so soon after an election,” Nedbank economist Isaac Matshego said.
“Any deep instability within the government would hurt financial markets and elevate uncertainty further, which would dent business confidence. We have to look at the effect of instability on government policies,” Matshego said.
The challenge for the ANC is how to resolve its internal issues while it tries to revitalise the country’s battered economy —which has not grown more than 2% since 2013.
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