South Africa: the ANC’s elective conference 2017

With just under three weeks to go until the African National Congress’s (ANC) elective conference, the race to succeed President Jacob Zuma is entering its most critical phase. The conference occurs against a backdrop of prolonged controversy around the country’s leadership, prompted by scandals in government and widening divisions within the heart of the ruling party. This has added to the strategic uncertainties around what looks set to be a critical transition for the country. The ANC’s reputation and unity are at stake. But more importantly, South Africa’s future economic and development prospects likely depend upon the outcome of leadership vote. In this note, we explore prospects for the elective conference and for the future of South African politics

The ANC: a fallen giant

After two decades in power, the ANC’s reputation as the party that momentously led South Africa out of apartheid has been hammered by a succession of governance scandals and internal clashes. The party’s post-apartheid promise of ‘a better life for all’ has become an increasingly vanishing prospect, with progress on the economic transformation agenda remaining slow, and developmental gains even reversing in some areas. The tragic signs of these unmet expectations can be seen in national data. Growth has been anaemic for a number of years, with the latest projections for 2017 recently revised down from 1.3% to 0.7%. Unemployment stands at 27.7% (close to 40% when counting those who have stopped searching for jobs). Around half the population lives in poverty, and inequality remains extremely prevalent, with 10% of the population reportedly owning 90% of the country’s wealth. Meanwhile, whereas the government’s tax revenue base has struggled to grow, the public wage bill has risen steadily during a sustained period of stagnant growth. Amid a widening fiscal deficit, public debt is set to rise.

Many observers have pointed at government failings being at the heart of this bleak economic outlook. The government’s poor track record on delivering services and tackling governance shortfalls has created wastage and drift at the heart of the economy, while politicised policy uncertainties have created a challenging environment for investment. As the national ruling party at the heart of this malaise, the ANC has witnessed a snowballing erosion of its national and global reputation, compromising its moral authority as the champion of tackling apartheid. Much of the public criticism and ire has focused on the party’s leader President Zuma, for his failure to oversee a responsible, competent and incorrupt administration, governed upon the principles on which it was founded.

The ANC therefore enters this elective conference in a deflated and divided state, seeking to pick a new leader who can begin to tackle the considerable economic, social and political challenge that the country still faces. The winner of the contest is likely to become the next President of the country, either in 2018 if Zuma steps down to pave the way for fresh leadership, or in 2019 if the ANC wins the next election, when Zuma’s term must

constitutionally end.

A high-stakes play

For the first time since it came to office, the ANC faces the prospect of a genuine political challenge to its national political dominance. The party won the last national election in 2014 by 62.2%, dropping from 65,9% in 2009 (see figure 1). Since then, the loss of three metros in local government elections in 2016 gave the party a taste of possible things to come. This has frightened many of its leaders. A recent IPSOS poll has for the first time shown that the party was supported by only 47% of respondents as a further indication of its dwindling public support under Zuma.

For the President, who faces 18 charges on 783 accounts of fraud, the stakes remain very high. While these charges pre-date his presidency, Zuma also faces a raft of potential legal challenges relating to allegations of ‘state capture’ relating to his alleged ties to the Gupta family, who have notable business links to the President’s family, and are seen to have carried influence over certain lucrative state contracts. The state capture scandal has now crossed oceans and is being investigated by both the FBI and authorities in the UK. Meanwhile, it remains a highly politicised issue at home in South Africa. For the succession race, Zuma likely therefore feels in need of a proxy who can provide him with a political and legal buffer to protect his legacy.

Figure 1: ANC share of vote trends

But the stakes go beyond Zuma and the ANC, with South Africa’s economic and constitutional integrity also in play. South Africa is at risk of further downgrades that could tip the country off Citi’s World Government Bond Index (WGBI), the biggest of the global benchmarks and tracked by about $2-3 trillion of funds. Meanwhile, the economy remains vulnerable to other financial outflows should the government pander to some of the more populist calls for a more radical pursuit of economic transformation, including expropriation of land without compensation. The legal system has also come under unprecedented pressure as it becomes increasingly embroiled in political intrigue, raising questions over its capacity to serve as a check against the powers of the executive, parliament and other strategic offices. Any further weakening of the judiciary would serve to erode the pillars of the country’s democracy.

As such, the ANC’s future leadership will have a significant bearing on the future political direction of the government, and the impact this has on the health of South Africa’s economy, society and democratic system.

Nkosazana Dlamini Zuma (left); Cyril Ramaphosa (right)

The policy debate

With so much attention focused on pure power-politics, the policy debate has been somewhat smothered. Economic transformation is the leading theme driving the campaigning and has become the shorthand that encompasses discussions on governance and corruption, as well as various sub-themes like free education, service delivery and the highly emotive land question. In appreciation of the gravity of South Africa’s transformation debate, even business interest groups have joined the action by offering proposals on the matter. Radical economic transformation – in whatever form – is a debate that will go far beyond the ANC conference and will form part of the South African political narrative going towards 2019.

Ramaphosa and Dlamini-Zuma have expressed different views on how economic transformation should be approached. Dlamini-Zuma has suggested that in order to deliver results, the reform agenda requires amendments to the constitution, whereas Ramaphosa has insisted that any reforms should be pursued under the present legal system. Ramaphosa has even dropped the ‘radical’ in his proposal on transformation in anticipation of the fears this generates within the business community. While these differing approaches reflect Ramaphosa’s more pro-business leanings, both candidates are ultimately likely to pursue pragmatist approaches to policymaking, with Ramaphosa acutely aware of the need to satisfy some of the interest groups supporting him – including powerful union groups – and Dlamini-Zuma adopting a similar approach to her predecessor in which she would be prone to populist pressures but would steer clear of a truly radical agenda that could cause economic freefall.

The two candidates differ considerably on their stance around corruption, with Ramaphosa publicly citing his concerns over state capture and the need to properly investigate and treat this, whereas Dlamini-Zuma has remained largely silent on this issue. At this stage, these stances are predominantly a power play, with Ramaphosa appealing to Zuma’s detractors, and Dlamini-Zuma sweeping up the patronage and populist structures which have surrounded the incumbent President in office. Ramaphosa’s commitment to tackling corruption and holding Zuma to account over the state capture issue is credible, but it will come under significant pressure if he is to hold the party together.

A more nuanced view on policy approach is only likely to emerge after the conference, specifically around developmental priorities, macro-economic management, public sector reform, specific sector-level issues, and requirements to address popular pressures around jobs, service provision and wealth redistribution. Both candidates will face systemic constraints and political conditions that will shape how they respond in the aftermath of the conference. Most analysts would agree that the policy outlook will be more positive under a Ramaphosa victory however, with the party and country better positioned to take a different turn of direction from the stagnation and governance deterioration witnessed under Zuma.

The voting balances

An unprecedented seven candidates have put their name in the hat to become the future leader of the party and nation. These candidates include deputy president Cyril Ramaphosa, former African Union Commission chairwoman Nkosazana Dlamini-Zuma, ANC Treasurer-General Zweli Mkhize, and other ANC stalwarts Mathews Phosa, Lindiwe Sisulu, Jeff Radebe and Baleka Mbethe. Of these candidates, only Ramaphosa and Dlamini-Zuma are the clear front runners.

The conference is expected to see around 5,000 delegates making the final decision on the ANC’s future leadership. Local branches make up 90% of these delegates with an estimated 4,723 delegates headed to the conference from branches. So far, 90% of the ANC’s branches have completed their branch general meetings (BGMs) to nominate ANC leaders. The delegates from each of the branches will be expected to vote according to the branch nominations. However, with dirty money at play, there is a risk that delegates could vote against their branch wishes. The remaining delegates will come from the country’s nine Provincial Executive Councils (PECs) and from the party’s Women’s League, Veteran’s League and Youth League. However, the Eastern Cape and KwaZulu Natal PECs are facing court challenges.

In terms of the balance of support between Ramaphosa and Dlamini-Zuma, support is heavily divided on geographic lines. The remaining candidates have received very few nominations with even Zweli Mkhize, who has been viewed as a dark horse in the race has failed to make a mark in terms of delegates. But they may play their part by jumping on the slates of the two leading incumbents as the contest evolves. Overall, it seems Ramaphosa edges Dlamini-Zuma in terms of branch delegates, with a majority in five of the nine provinces. However, Dlamini-Zuma, will receive strong support in two of the largest provinces, KwaZulu-Natal and Mpumalanga, which make up approximately 34% of the delegates, which keeps her in the race. She will also be helped by support from the three leagues which are largely on her side.

For a candidate to secure victory, they would need to secure backing from 2,314 delegates. Polls taken by the Institute of Race Relations (IRR) and Markdata show Ramaphosa as leading the nomination process after three quarters of the branches completed their processes. The candidates themselves have been touting their own predicted numbers with the Dlamini-Zuma camp predicting a total of 2,596 delegates, while the Ramaphosa camp predicts receiving 2,560 delegates. As the camps head towards the conference there will likely be a lot of propaganda in the media on how much support each candidate is receiving from the various provinces.

Recently, the ANC has announced that it wants to change the way it elects the top six positions of the party, namely: President, Deputy President, Secretary-General, Deputy Secretary General, Treasurer General and National Chair. Whilst in the past these positions were voted for simultaneously, this resulted in the issue of slates, which meant losing party leadership candidates were often completely left out of contention for other prominent positions. This time, the ANC wants to have a separate round for the election of the President and the remaining top five positions, which could allow those who lose the race for President to step in for nominations for other positions. The ANC likely believes this could allow for some unity after a grueling and divisive election campaign.

ANC Elective Conference Delegate vote prediction

*The KZN PEC was annulled by a court but this is being appealed. The PEC may not be able to vote at the conference

Conference scenario outcomes

We believe there are three possible scenarios for the conference. Of these, we feel the most likely is a victory for Ramaphosa, which will probably send the most positive message that can be expected to the markets and investors. The second would see Dlamini-Zuma emerge as victor which will potentially carry more severe political and economic consequences, notably regarding the immediate reaction. The third scenario would see a postponement of the conference or result amid internal wrangling, sending a very negative message to the market.

• Cyril Ramaphosa (50% likelihood) – SA to avoid the cliff but remain in limbo until 2019

Ramaphosa is a market favourite, with stock indices already rising in anticipation of his victory, which could prompt a swifter exit for Zuma from office next year. The billionaire former businessman, who has also been endorsed by another market favourite, Pravin Gordhan, has expressed a fiscally conservative position aimed at securing investor confidence and avoiding a downgrade. However, he will have to tread a very cautious line on the economy to accommodate his diverse backers which include socialists, unionists and businesses; an unlikely collective.

Ramaphosa is seen as a pragmatist who understands the business community but is also alert to the social pressures underpinning South Africa’s economy. Should he win, we are likely to see him take on the arduous task of reversing some of Zuma’s policy moves, such as the ongoing push for a controversial nuclear deal and the free education proposal. However, he will also face significant heckling from the left, and may struggle to tackle the state’s heavy wage bill, such will be the resistance to any cuts from public-sector unions in #COSATU.

Ramaphosa’s victory would prompt a notable short-term boost to the markets, with businesses seeing him as a more pro-business figure. However, the deputy president’s diverse support base and need to preserve efforts to support the transformation agenda will mean that all decisions will need to be balanced in this light, and we anticipate that there will need to remain significant concessions to the unions and left of the party if Ramaphosa is to succeed.

Ramaphosa’s biggest challenge will be following through with his promise to deal with corruption, notably by seeing out the state capture inquiry without causing a break-up of his own party. Pursuit of the case would mean allowing the prosecution of some high-ranking ANC officials across government and state enterprises. Following through with these could lead to further fractures within the party. It’s possible Ramaphosa may not have the stomach to follow through with this as a priority, which could further dent the ANC’s reputation with the public.

In terms of executing new policies, Ramaphosa won’t be able to drive an ambitious reform agenda before the 2019 elections, because he will be hamstrung by his need to keep the party on a positive trajectory towards the elections. He will likely seek to restore confidence through his appointments, and revive the ANC’s reputation by signalling a new direction for the country. But this will be cautious from a policy perspective because of the need to balance interests within and outside his party. Nevertheless, we can anticipate some positive agreements with business and back-tracking on some of the more controversial initiatives being pursued by Zuma – including in the mining sector, and in several state parastatals.

With Ramaphosa at the helm, the ANC may experience a small electoral boost, limiting the erosion of its support base, which could nevertheless still slide below 60% for the first time given the shadow cast by the Zuma years.

• Nkosazana Dlamini-Zuma Victory (30% likelihood) – a slide into policy incoherence and political disarray

Dlamini-Zuma’s campaign has lacked dynamism but she retains a strong popular support base, with many of her ex-husband’s followers becoming her principal backers. This gives credence to the assumptions that she represents a continuation of Zuma’s legacy. Like Ramaphosa, she has spoken out on the need for a more visible economic transformation, but her vision for transformation has been tainted by association to the Bell Pottinger-linked Gupta anti-white capital narrative. Dlamini-Zuma has generally demonstrated a more populist tendency which jars with business. She has also not engaged actively in the debate around state capture, underlining where her loyalties lie.

A Dlamini-Zuma victory will likely send a shock wave through the markets and within the ANC. Her campaign has not shown appreciation for the criticism leveled at Zuma’s treatment of treasury and its imprudent approach to government expenditure. Rating agencies will be likely to revise South Africa’s credit rating downwards in anticipation of further populist moves in the economy. Her victory could therefore mean that national treasury will be used to further fund ill-advised state projects like the nuclear deal, and poorly-overseen funding of failing state agencies. The government could dig into pension schemes and other strategic funds to finance these initiatives, further eroding state finances.

Politically, her victory could prompt a notable split in the ANC, with key members of the party leaving or facing a purge as the Zuma and Dlamini-Zuma factions seek to re-assert control over ANC structures and squeeze out dissenters. The ANC’s prospects at the 2019 elections would likely be worse than under Ramaphosa. Although she would use populist measures to try and rally support from the left, which would be forthcoming in some key ANC heartlands, the opposition and losing party factions will remain vocal on the issues of governance and state capture, damaging the ANC’s reputation further and continuing recent trends of eroding support. Dlamini-Zuma would be inextricably linked with her former husband, adding to perception issues with the government. Purged ANC leaders are likely to form anti-ANC coalitions which alongside an emboldened opposition would seek to erode ANC support and potentially even look to oust the ruling party in 2019.

• A conference delay or postponement (20% likelihood) – party wrangling and legal challenges disrupt the process

The conference itself will likely be an unruly affair. There will be fights over how the process is conducted with a focus on the impartiality of presiding officials. Party Secretary-General Gwede Mantashe has already faced the wrath of Dlamini-Zuma’s supporters who wanted to see him removed from his position after his name appeared on a top-six slate of Cyril Ramaphosa, as the National Chair of the party. The supporters charge that the Secretary-General’s role as a key overseer of the conference is compromised since he now lacks impartiality. There is also unverified speculation that President Zuma is seeking to sabotage the conference in order to ensure that there will be no quorum, which could lead to a delay. This would prolong his stay in power, and allow his forces to regroup in trying to win.

There is a clear fear in the Zuma and Dlamini-Zuma camp that they could lose the vote. Should the electoral conference go ahead, the losers could contest the outcome through political and legal channels. This would likely see them first seek to address this within the conference and internal structures of the ANC, which considering the fractured state of the party is unlikely to see any resolution. The failure of an internal resolution could see the battle head to the courts.

Despite these possible challenges, we believe the conference will go ahead as planned and lead to an outcome. Following the outcome, the victor will determine the fate of President Zuma, and how long he has to stay on as President of the country. Both leading candidates are in parliament, which would make a transition to the position of President relatively straightforward.

South Africa beyond the elective conference

Such is the balance of politics within the ANC at present that the ruling party could have to contend with a split, whatever the outcome of the election. The victorious candidate will have to confront a number of thorny political challenges, ranging from possible splits to how to handle Zuma, who can technically remain in office until 2019. Handling of this latter issue could in itself be something that creates rifts in the heart of the ANC – something the party will be desperate to avoid if it is to compete effectively in 2019 and maintain its status as the ruling party.

Beyond these political issues, the next party leader will also face the monumental challenge of reviving investor confidence and driving economic growth, while keeping a balance with achieving results under the economic transformation agenda. Even if Zuma is removed ahead of 2019, resolving the problems created under his administration and dealing with a range of inquiries into corruption and mismanagement would leave the ANC distracted for most of 2018. The outcomes of the inquiries could either see a process that is aimed at sweeping the issue under the rug, or it could lead to another prolonged (and politicised) investigation and litigation. Given the risks to the party of exposing its shortcomings in preventing the looting of state assets, both candidates may prove wary of pursuing this latter approach with too much conviction.

Meanwhile, the policy challenges South Africa is currently facing – particularly in the economic space – are unlikely to be dealt with thoroughly until after the 2019 elections. Whichever candidate wins will be restrained by economic, legal and political realities. Despite both candidates’ promise to reinvigorate the system and drive rapid change, systemic conditions make this unlikely. The ANC leader will also face a sceptical public and robust opposition seeking to unseat it in 2019. This will give very little political room for manoeuvre in the short term. Instead, the emerging leader will likely rely more on reform rhetoric than action. These dynamics will either see South Africa slide further into a state of policy incoherence, or more likely remain in a state of limbo until the 2019 election provides a surer footing from which the national leadership can move forward.

Originally published on the africapractice blog: http://www.africapractice.com/snapshots/?id=23798