It has been about six weeks since President Cyril Ramaphosa reshuffled his cabinet in the wake of the catastrophic violence and looting that gripped the country in July.
The move was long in coming even before those events, and had been speculated upon since January, when Jackson Mthembu, who served as minister in the presidency, tragically succumbed to Covid-19. There was also the scandal that hung over the now former health minister Zweli Mkhize for several months before he was finally removed.
But anyone who had thought the change in the executive would herald a new era of governance with a unity of purpose will be disappointed. It can’t be said that Ramaphosa has taken the opportunity to show he has a grip on his executive, something that would reduce uncertainty in what has been a turbulent period for businesses weighing up investment decisions.
“Elevated policy uncertainty acts as a tax on investment,” says the first line of a paper by North West University professors Raymond Parsons and Waldo Krugell, further going on to note that high levels of policy uncertainty or “shocks” can inhibit business decision-making. They go on to conclude that the level of policy uncertainty is one of the important elements shaping investment decisions.
A relatively small and open economy like that of SA is subject to other sources of uncertainty it can’t necessarily control. The evolution of the global pandemic and policy responses from central banks and governments in advanced economies is just one.
But the message the government wants to send to potential investors about its intentions is something that is very much within its control. And it is seriously misfiring. At the end of August, social development minister Lindiwe Zulu was forced to withdraw a controversial green paper, apparently based on “social security principles of risk pooling and social solidarity”, that was released to the public without prior consultation within cabinet.
Climate change
The paper caused unease across the board, not least for the savings industry the government relies on for its own funding needs, whose business model was put under grave threat. Even when the green paper was withdrawn, the minister suggested it could come back in another form.
There are many more examples. The government has struggled to show a common voice on the country’s approach to the danger presented by climate change.
Even when Ramaphosa announced in June the liberalisation of the licensing regime for private generation of power, something that is seen as crucial to promoting private investment, the minister responsible, Gwede Mantashe, admitted that his arm had to be twisted to go along. Last week, deputy finance minister David Masondo came up with suggestions of a possible solution to Eskom’s legacy debt that involved a degree of debt forgiveness. Stranger still was the fact that these were acknowledged to be his own individual views rather than those of the collective.
Since the riots highlighted the country’s unsustainable levels of unemployment, poverty and inequality, the ANC has been on the back foot on whether and how to expand social grants.
The issue of a basic income grant is firmly on the agenda, despite finance minister Enoch Godongwana having indicated that it is not affordable. Ironically, the newly installed minister in the presidency, Mondli Gungubele, was the latest one to sow confusion on the issue, saying on Newzroom Afrika on Tuesday the government is considering how to implement a basic income grant. It is ironic because it was the same Gungubele who was dispatched to tell the media that the issuing of Zulu’s paper was irregular.
Ramaphosa needs to show he is running a tight ship and that his cabinet is of one mind. It is not sufficient to attract investment on its own — but it's a crucial element is creating the certainty needed by investors.
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