South Africa is at a tipping point. This is a critical period in our history; probably as critical as in 1993, at the lead up to the first free and fair elections of ‘94. We cannot help but think that what happens next will see us through for the next 20 years.
On Monday 11 January, as most of us returned to work from our Christmas holidays, we turned on the radio to hear the news that the Rand had hit R18. “What currency are they referring to?”’ many of us were left wondering!
Emotionally it’s very draining. In December, we had an investment downgrade followed a week later by the announcement that Nene was gone and Van Rooyen was in. The markets were brutal in their assessment. Money was sucked out of South Africa very quickly, stock prices collapsed. Racism accusations, student uprisings, drought, collapsed currency, junk bond status, unclear government policies, rampant corruption, nepotism and poor service delivery. You could not find a single person who was speaking positively about our country’s future. “The Rand is never coming back.” “We are going the same way as Zimbabwe.” “How can I get my assets offshore as quickly as possible?” These were the opinions and concerns being expressed around the braai and at dinner parties.
How did we all respond to this?
The critical point we’d like to make, and it is literally “critical”, is that South Africa has responded! Aware of the seriousness of the situation, some people marched, some went to see the President, some went to court and some joined together for the greater good of the country. Also critical was Business, which demanded that government talks and works with them. Reflecting back on the last three months, we’d say that there have been some gigantic forward leaps taken.
Zuma has been weakened considerably. Up until now, he has used a strategy of patronage in which he bought loyalty, but the purse strings were removed when Pravin Gordhan was reinstated as finance minister.
The reversal in the Van Rooyen decision was simply remarkable; it showed that Business (whose representatives explained to the ANC Top 6 what a downgrade looks like) can influence government policy. Foreign governments can also play a role: there were unconfirmed rumours that Zuma was contacted both by Chinese leaders and Angela Merkel (Germany) during this period, who were also worried about their countries’ investments.
The Constitutional court case on Nkandla was also a powerful illustration that while our independent judiciary has been weakened over the last 10 years, no one is more powerful than the Constitution. It also gave the Public Prosecutor position a much needed moral boost, clarifying to those in power what they can and cannot do.
Another powerful change has been the absolute focus by all political parties to avert a downgrade, which despite their efforts, may or may not be averted at this point. There is a perfect storm forming that may make it impossible to avoid, but we have moved from a scenario of absolute certainty to a 50:50 chance today.
We’ve gone from situations in which government would not listen to Business in the case of tourist visas which were hurting us, and mines that had no idea what the government policies were – to a government openly engaging with business in an ongoing manner. Much the same as in 1993, government is realising again that it needs business to believe in South Africa.
The funny thing about life is that no matter what the economic circumstances, there will always be opportunities. If it continues to rain now, then in 2018 it would mean that farmers could add 1% to our economic growth. Electricity could stabilise and this would add a further 1.1% to our GDP. And then there’s our silent national treasure – Tourism – which the weak rand is currently helping. Everyone wants to come here: we struggle to deal with the numbers. Cape Town was full over Christmas; in fact, the tourist visa situation might have oddly helped us cope! Tourism is an area we need to work on. Also pointing towards opportunity is the fact that the National Development Plan is now firmly back on the table after becoming ‘a bit of a joke’. Government has to produce, give certainty and cut back on spending. There is suddenly an urgency to get things done, a bit like 2010 when the World Cup was coming.
We believe it’s vital that we stay focussed and continue to work together as a country. If we do slip into Junk Bond status, we believe that we would be able to bounce out of it quite quickly, with the momentum that has been created.
We stand on a tipping point in our history and avoiding junk bond status is certainly not the only prize we are after. Whether it happens or not, we need to put the train back on the tracks and push it until the engine kicks in again. There is no doubt that South Africa has huge challenges, but we also believe it’s important to never lose sight of the positives.