MAMOKETE LIJANE: Concerns about state of post-election SA misplaced

We are going into elections at a time when SA’s listed assets are under-owned. The primary reason for this is a lack of growth, which has depressed earnings and created a debt sustainability problem.

To unlock value, growth must be revived and this is being done. There is sufficient traction in economic reforms and the SA growth story to attract investment.

However, investors are worried about election outcomes. If ANC support falls too low, we hear, SA could be uninvestable. The angst about the election is often couched in very simplistic terms. The discussion, however, conflates two types of worries. The simple one is about policy continuity. The more complex is about the viability of SA as a democracy and the risk that the country becomes a failed state.

On policy continuity, the most pressing issues are growth reforms and fiscal policy. Could these elections produce a government that is less committed to growth reforms and/or which spends beyond its means? We do not think any coalition would undo the progress made on growth reforms, as now articulated. Inefficient government monopolies in energy generation and logistics have been broken, as happened with many sectors when apartheid ended. This should set SA up for better growth going forward, regardless of who is in government.

On fiscal policy, the current government is not spending because it has reached the upper limits of what it can spend, given the growth dynamic. Growth and interest rate differentials put SA on an explosive debt trajectory. The only way to create spending room is to unlock growth.

Any governing coalition will be confronted with the same constraints. Fortunately, reviving growth helps on both counts, which should incentivise policy continuity. This dynamic will prevail regardless of who is in government.

The more interesting question is that on SA’s long-term viability.

At the extreme end, people are worried that the next era in SA politics could lead to unravelling of the institutional infrastructure in a Zimbabwe-esque manner. This concern has clouded SA since the advent of democracy. It was obviously ridiculous for traders to go along with Zimbabwe’s then SA’s narratives when Zimbabwe was unravelling in 2001, but people did.

A person responsible for billions in funds once told me “Afropessimism” was a valid investment rationale. It is important that we all remember that Africa is not a country and actually look at SA’s track record in this regard.

Checks and balances

The institutional infrastructure in SA was tested in the latter years of the Jacob Zuma government and prevailed. A fragile polity could not have stood against an errant president leading a party with 62% of the national vote. If you need evidence that SA is anti-fragile, that is it. Any governing coalition would be subject to the same checks and balances, which makes it highly unlikely, in my opinion, that SA would ever be a Zimbabwe.

No democratic dispensation is unassailable, and we should never take this democratic dispensation for granted. However, there is no reason yet to expect that it will not hold.

Even then, our democracy is flawed, and its flaws stem from its inability to hold the state accountable. The reform agenda as now articulated is well short of some of the critical areas of delivery. Education is failing, yet we hear about no special push in this regard. Where are the debates on trade policy? Who is held accountable for our rising crime rates? Where are we with creating a more inclusive economy? A more competitive political space could create better alignment between the interest of political elites and the electorate. I am very excited about this possibility.

For portfolio investors, more of the same gives welcome certainty. For a citizen whose investment in this country goes beyond money, more of the same is the suboptimal outcome. We cannot know what will come, but we have a chance now to move away from an untenable status quo.

• Lijane is global markets strategist at Standard Bank CIB.