Markets have lurched from euphoria to anxiety daily in recent weeks. They priced in the “tail risk” of a worst-case EFF coalition scenario earlier in the year, then staged a huge relief rally when their “goldilocks” DA scenario seemed to materialise.
Now a dose of reality is settling in as it becomes clear how complicated it is going to be to make the new government of national unity (GNU) work.
Perhaps it’s good to get the euphoria out of the way early, and to shift the spotlight from the short-termism of financial markets to the longer term of the real economy and of how much the new cabinet can affect macroeconomic outcomes in coming years.
The swearing in of multiple new ministers on Wednesday raised questions of whether ministers matter, how much of a difference a minister can make and who among them can make a difference to the economy.
The focus in the past couple of weeks has been on how many cabinet seats each party will get and who will get those seats. Now President Cyril Ramaphosa has to pull them all together into a working executive, starting with the usual cabinet lekgotla ahead of the state of the nation speech on July 18.
To turn around the economy he has to keep the focus on key structural reforms and get those implemented. It’s going to be complicated. It’s going to take a while.
There is plenty of new blood, and young blood, in the new cabinet, from all the parties. That generational shift and diversity is hugely welcome. But many of those new ministers have little or no experience of government or of running large organisations, and no background in their sectors.
They will have to work with teams and colleagues from different parties and ideological backgrounds. It will be a steep learning curve. It will be a learning curve too for the more experienced ANC ministers who have been shifted to new portfolios. In some cases it will be complicated by the restructuring of the portfolios themselves.
Splitting a department can take a year or more to implement. Abolishing the public enterprises department, desirable as that might be, creates a whole new layer of uncertainty about who will own the process and whether the presidency has the capacity to sort it out.
Senior officials in the government are about to discover that it’s no longer good enough just to lobby the ANC chair of the parliamentary committee if you want to get things through
As those new to the cabinet will discover, ministers have only limited powers on their own. They can and must make decisions, set priorities and drive policy shifts. But they depend on their directors-general (DGs) to make these happen. A good minister needs a partnership with their DG to be effective.
Those new GNU partner ministers who find DGs in place who are professionals, rather than ANC commissars, will be lucky. That’s especially so given that a minister doesn’t appoint their DG — that’s done by a committee of ministers and endorsed by the cabinet — and that it is the DG who usually appoints the chief directors and others responsible for implementation.
Any big policy shifts have to go through the cabinet, and then through parliament if they require legislative changes.
Senior officials in the government are about to discover that it’s no longer good enough just to lobby the ANC chair of the parliamentary committee if you want to get things through — they will have to build relationships with other parties now, though they might find useful new allies.
While in theory policy shifts are collective cabinet decisions, ministers often have significant regulatory powers, not to mention the power to ensure their departments resist reforms they don’t like. Gwede Mantashe and the long battle over electricity market reform is just one example.
What’s going to be different in the new executive is that Ramaphosa and his reform-minded ministers in the ANC will have new allies among their GNU partners, particularly in the DA. It won’t suddenly remove the resistance to change, whether because of ideology or inertia, or just turf protection. But the conversation in the cabinet room will be different. It may be more contested; it will be more competitive.
That surely has to be good for governing. What will complicate turnaround efforts by some of the new ministers are the complexities of concurrent powers.
To make a real difference in basic education, the DA’s Siviwe Gwarube depends on the provinces. The provinces are key in health and agriculture, too.
What’s more, when it comes to front-line service delivery in electricity or water and sanitation or roads, it’s the municipalities that matter. That makes the IFP one to watch. It has been given the two departments that are at the core of governing and governance: public service & administration, which means we will have the IFP’s Mzamo Buthelezi negotiating public sector wages for government, and co-operative governance & traditional affairs, which will put the party’s leader, Velenkosini Hlabisa, in charge of the urgent local government reform that Operation Vulindlela has suggested should be next on the list of priority economic growth-boosting reforms.
That touches on the second question of which ministers matter to economic outcomes. The market’s focus has been on the Operation Vulindlela reforms — especially in energy and logistics but also digital communications, water and the visa regime. A big driver of the relief rally has been the confidence that these would continue.
With electricity reform now under way, transport is the big one, especially now that it will have shareholder oversight of Transnet. Its new minister, Barbara Creecy, is one of the more experienced and well regarded of the ANC’s ministers.
A lot has been done on legislative and institutional reforms, but the task of actually implementing these, breaking Transnet’s monopoly and restructuring the logistics sector, is still an extremely tough one. But it’s crucial if the economy is to grow faster.
At home affairs, by contrast, the DA’s Leon Schreiber has the advantage that all the regulatory reforms to open up the visa system to skilled foreign immigration and ease it for tourists have been pushed through. Now he just has to get the department to implement them. Even if that adds just a few basis points to the economic growth rate, it all adds up.
While it makes sense to focus on a limited set of priority reforms with the potential for maximum macroeconomic impact, the ministries that matter for growth range wider than Operation Vulindlela. Here the department of trade, industry & competition deserves special mention. Its new minister, Parks Tau, is not from the DA. But he is not Ebrahim Patel.
If Tau can instil a less interventionist, more market-friendly approach to trade, industrial and competition policy that is more welcoming of investment, foreign and local, he could add many more basis points to the growth rate.
Bad ministers can do a good deal of damage. Good ones can transform outcomes. If the balance in this cabinet proves positive for the economy, it will lift the macro and the markets, not just in the short term but also into the future.
• Joffe is editor-at-large.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.