JOHANNESBURG (Reuters) &#8211; An inquiry reviewing evidence on Tom Moyane, the suspended head of South Africa’s Revenue Service (SARS), issued an interim report on Tuesday urging President Cyril Ramaphosa to fire the tax official.
The agency has been plagued by infighting over the last three years and is subject to ongoing government investigations.
Judge Robert Nugent, who is heading the inquiry into Moyane, says the suspended tax chief should be removed from office for the “reckless mismanagement of SARS” under his tenure.
“We consider it imperative that a new commissioner be appointed without delay to remove the uncertainty at SARS and enable it to be set on a firm course of recovery so as to arrest ongoing loss of revenue,” Nugent said in the report.
In March, Ramaphosa suspended Moyane, saying he had failed as commissioner of the revenue service and had lost the confidence of taxpayers.
Moyane was not available for comment on Tuesday. He has repeatedly defended his record and denied any wrongdoing.
The president’s office said Ramaphosa was weighing up the contents of the interim report and its recommendations.
As part of that process, Ramaphosa had given a copy of the interim report to Moyane, and invited him to make any submissions on its recommendations.
Moyane, who was appointed in 2014, had been criticised by SARS employees and members of the ruling African National Congress after the tax agency missed revenue collection targets and faced allegations of corruption and mismanagement.
Reporting by James Macharia; Editing by Gareth Jones

South Africa’s Ramaphosa urged to fire suspended tax head, what you need to know…

JOHANNESBURG (Reuters) &#8211; South African Finance Minister Nhlanhla Nene has asked President Cyril Ramaphosa to remove him after he admitted to visiting the home of the Gupta brothers, friends of scandal-plagued former leader Jacob Zuma, Business Day said on Monday, sending the rand lower.
Nene has become a divisive figure after testimony he gave at an inquiry into allegations of corruption by the Guptas, in which he admitted to the previously undisclosed visits. He made a public apology about the matter on Friday.
Zuma and the Guptas, who face numerous allegations of using their friendship for mutual self-enrichment, have consistently denied any wrongdoing.
Business Day cited unidentified government sources as saying that Nene made the request to Ramaphosa at the weekend. Nene did not answer calls for comment.
“Government sources said Nene approached Ramaphosa after the highly negative public reaction to his apology to South Africans on Friday for the meetings with the Gupta family when he served under Zuma,” the South African newspaper said.
It said the issue was likely to be raised at a meeting of the ruling African National Congress party later on Monday.
The rand fell more than one percent on the report.
Treasury spokesman Jabulani Sikhakhane referred Reuters to the presidency for comment. Ramaphosa’s spokeswoman Khusela Diko did not respond to phone calls.
Nene is a key ally of Ramaphosa, who reappointed him finance minister in a cabinet reshuffle shortly after he became president earlier this year.
Ramaphosa has made clean governance and the kick-starting of an economy mired in recession top priorities.
Several ministers and government officials have been implicated in the widening graft scandals around the Guptas.
One common theme that has emerged is visits to the family’s sprawling Johannesburg property, which is why there has been public anger regarding Nene’s revelations.
Nene has also been praised by commentators for standing up to Zuma.
He told the inquiry he was fired by Zuma in December 2015 for blocking deals that would have benefited the Guptas, particularly a $100 billion nuclear power deal with Russia that could have crippled Africa’s most developed economy.
But Nene’s opponents say he was involved in corrupt deals with the Guptas when he was deputy finance minister and head of the state pension fund. He denies ever helping the Guptas.
Opposition parties have called for his resignation.
Reporting by Ed Stoddard, Alexander Winning and Olivia Kumwenda-Mtambo; Editing by Joe Brock

Rand drops as South Africa’s finance minister asks Ramaphosa to remove him

JOHANNESBURG (Reuters) &#8211; South African President Cyril Ramaphosa’s multi-billion dollar plan to turnaround the economy will do little to lift the country’s sluggish economic growth rate, ratings agency Fitch said on Tuesday.
“South Africa’s latest economic plan is unlikely to deliver a significant boost to economic growth,” said Fitch, which rates Pretoria’s foreign and local currency debt at subinvestment, adding that rand’s recent plunge would also hinder the plan.
“The plan does include measures that could support growth, but many relate to long-standing policy ideas that have been slow to implement,” Fitch said of the plan announced by Ramaphosa on Friday to pull the economy out of recession.
Reporting by Mfuneko Toyana; Editing by Ed Stoddard

Fitch_Flickr

Why Fitch thinks South Africa’s #StimulusPackage is unlikely to boost growth in the country’s economy

JOHANNESBURG (Reuters) &#8211; South Africa’s President Cyril Ramaphosa said on Monday there would be no mass layoffs of public sector workers as his government considers various ways to pull the economy out of a recession that has rattled the rand and investor confidence.
The economy slipped into recession in the second quarter for the first time since 2009, data showed in August, a stinging blow to Ramaphosa’s pledge to revive the economy and reduce record-high unemployment after a decade of stagnation.
In June, the National Treasury said it was considering layoffs and early retirement packages for staff in the public sector to avoid breaking its pledge to cut spending after unions clinched above-inflation wage increases.
“The mass retrenchment of public sector workers is not under consideration,” Ramaphosa said at trade union federation Cosatu’s electoral conference in Johannesburg.
“The context of slow economic growth and weak revenue collection means that expenditure on other critical things will suffer &#8230; but we need to address this in a way that does not put the livelihoods of public sector workers at risk.”
The contraction in the economy sent the rand tumbling and triggered warnings from ratings agency Moody’s that the country would struggle to increase revenue and deliver on a promise to cut spending and public debt.
South Africa needs faster economic growth to reduce its 27 percent unemployment rate and alleviate poverty and inequality, both of which stoke instability.
The ruling African National Congress has made repeated pledges to improve the economy. Unemployment is a key concern for voters ahead of elections next year.
Reporting by Mfuneko Toyana; Editing by James Macharia

Is South Africa planning mass layoffs in the public sector to deal with recession? Here’s what president Ramaphosa has to say…

CAPE TOWN (Reuters) &#8211; President Cyril Ramaphosa said on Tuesday there was no reason to believe that any country would impose sanctions on South Africa over the government’s plans to redistribute land to address racial disparities in ownership.
Ramaphosa announced in late July that the ruling African National Congress (ANC) plans to change the constitution to allow the expropriation of land without compensation, as whites still own the majority of South Africa’s land.
U.S. President Donald Trump waded into South Africa’s high-octane land debate last month when he asked his Secretary of State Mike Pompeo to study South African “land and farm seizures” in a late-night tweet.
Some analysts have since speculated that Trump’s government could impose economic sanctions on South Africa to express its disapproval with the ANC’s land reform agenda.
“We have no reason to believe that any country would impose sanctions on South Africa for any actions that we take, actions that are constitutional, that are lawful and consistent with international law,” Ramaphosa said in parliament while answering a question from an opposition party on his government’s land reform plans.
Ramaphosa added that the government was ready to discuss its land reform plans with any country. He repeated that land reform would follow a parliamentary process and that the government would not tolerate “land grabs”.
Reporting by Wendell Roelf; Writing by Alexander Winning; Editing by James Macharia

Will South Africa face sanctions over land reform? Here’s what Ramaphosa thinks…

JOHANNESBURG (Reuters) &#8211; The ruling African National Congress (ANC) on Sunday labelled reports that top ANC officials, including former President Jacob Zuma and the party’s secretary-general, were plotting in secret to unseat Cyril Ramaphosa as party leader as “shameless gossip”.
The Sunday Times newspaper said earlier on Sunday that Zuma held a clandestine meeting with staunch backers including ANC secretary-general Ace Magashule, former North-West premier Supra Mahumapelo, ANC Women’s league secretary-general Meokgo Matuba and ANC Youth league KwaZulu-Natal secretary Thanduxolo Sabelo on Thursday.
“The meeting is believed to have discussed a fightback strategy that involves court action to challenge the outcome of last year’s ANC national conference, which elected Ramaphosa party president,” Sunday Times said, citing witnesses and senior ANC leaders.
The paper said the first action from the group was a letter sent to Magashule on Wednesday from regional executive committees in the North West, challenging the ANC’s highest decision-making body for its decision to disband the Mahumapelo-led provincial executive committee.
In a statement, ANC spokesman Pule Mabe refuted the report, saying the ANC rejects attempts to link Magashule to the alleged plot to oust Ramaphosa.
“It is clear that this malicious gossip is calculated to cast aspersions on the integrity and commitment of our Secretary General to the unity and renewal project of the African National Congress,” Mabe said.
Ramaphosa narrowly defeated Zuma’s ex-wife and preferred successor, Nkosazana Dlamini-Zuma, in a leadership vote at the party’s national conference in December. The ANC then ordered Zuma to step down as president in February.
Since taking office, Ramaphosa has been prioritising rooting out corruption as he strives to put the sluggish economy back on a sustained growth trajectory. Such measures led to the forced resignation of Mahumapelo as North West leader.
As bold as some of Ramaphosa’s decisions have been, he still maintains a cautious leadership style as he and some ANC officials know the power that Zuma loyalists retain within the ANC, Africa’s oldest liberation movement.
The ANC Women’s League also rejected the report, saying in a statement it will “defend the unity and integrity of the ANC.”
Reporting by Nqobile Dludla, editing by David Evans

Are top ANC officials plotting to unseat South Africa’s Ramaphosa as party leader?

JOHANNESBURG/PRETORIA (Reuters) &#8211; South Africa will soon recover from recession, President Cyril Ramaphosa said on Thursday in his first reaction to news that undermines his effort to revive the economy and attract investment after a decade of stagnation.
Ramaphosa staked his reputation on economic revival when he took over in February from Jacob Zuma, whose tenure was plagued by scandal, and investors welcomed his accession to power in part due to his strong ties to the business community.
Ratings agency Moody’s said the slide into recession in the second quarter would exacerbate fiscal and monetary challenges. It said weaker-than-expected economic data was “credit negative”.
Data on Thursday showed the current account deficit narrowed to 3.3 percent of gross domestic product in the second quarter, from a revised 4.6 percent in the first quarter. The rand extended its gains to more than 1 percent stronger on the news.
The deficit figure was slightly smaller than the 3.4 percent deficit analysts polled by Reuters had expected, a much-needed boost for after data this week showed the economy slipped into recession for the first time since 2009.
In his first comments on the recession, Ramaphosa said the setbacks were temporary.
“All these things that are happening now are transitional issues that are going to pass,” Ramaphosa was quoted by local news agency Eyewitness News as saying.
“I will be meeting with the business community soon, so that we rally everyone together and pull our country out of the situation that we are in,” added Ramaphosa, who was attending a China-Africa summit in Beijing when the data was released.
South Africa needs faster economic growth to reduce its 27 percent unemployment rate and alleviate poverty and inequality, both of which stoke instability.
The ruling African National Congress (ANC) has made repeated pledges to improve the economy. Unemployment is a key concern for voters ahead of elections next year.
&nbsp;
MOODY’S WARNING
The rand has slumped as much as 5 percent against the dollar this week and government bonds have sold off steeply, also hurt by the turmoil on Turkish and Argentinian financial markets.
“This weaker-than-expected economic performance will exacerbate fiscal and monetary challenges, a credit negative,” Moody’s said in a statement on the weaker GDP figures.
The agency is the last of the “big three” international agencies to rate South Africa’s long-term foreign-currency debt investment grade.
While releasing the current account data, the Reserve Bank, which meets on Sept. 20 to decide on interest rates, said the improved current and trade account figures were due to higher value and volume of merchandised exports.
“South Africa’s terms of trade (including gold) improved in the second quarter of 2018 as the rand price of exports, including gold, increased at a faster pace than that of imports,” the central bank said in a statement.
Several foreign banks have slashed their growth forecasts for South Africa to less than 1 percent this year.
“Moody’s has pointed out that the task of fiscal consolidation is going to get harder, but I don’t think they’ll change our credit rating yet,” said portfolio manager Wayne McCurrie at First National Bank.
“A narrow current account helps. Any good news in this environment is really good news.”
Writing by James Macharia; Editing by Matthew Mpoke Bigg

Here’s what South Africa’s president Ramaphosa has to say about the country slipping into recession

By Gary van Staden, Senior Political Analyst at NKC African Economics
President Cyril Ramaphosa on Tuesday, July 31, took a leaf form his predecessor’s play book and sprung a late-night surprise on the nation with the announcement that the constitution would be amended to facilitate land expropriation without compensation, rendering futile any further discussion and representations on the issue.
It was a legalistic, populist political gambit that merely reinforces the belief that the ruling African National Congress (ANC) has no unclouded vision of where it wants to go but is determined to go there anyway.
The decision taken at the ANC’s two-day National Executive Committee (NEC) lekgotla was apparently informed by the views expressed at the ongoing hearings on land taking place across the country and headed by Parliament’s Constitutional Review Committee.
The fact that the Economic Freedom Fighters (EFF) voiced the view in favour of expropriation without compensation the most loudly spooked the ANC NEC and led to what is a premature decision.
The decision to amend the constitution to facilitate something the constitution already allows for was explained as a need to allow for the “explicit” expropriation of land without compensation.
Local media reported that Mr Ramaphosa said it had become “patently clear that our people want the constitution be more explicit about expropriation of land without compensation, as demonstrated in the public hearings. The lekgotla reaffirmed its position that a comprehensive land reform programme that enables equitable access to land will unlock economic growth by bringing more land in South Africa to full use and [will] enable the productive participation of millions more South Africans in the economy.”
It would be difficult to find a reasonable South African who would deny the urgent and necessary need for land reform, but such a reasonable person would also want to see the plan to understand the strategy and policy framework that would guide such reform in order to ensure that it would succeed in its mission of empowering the dispossessed and unlocking economic potential.
What they would have seen on Tuesday night was an ANC terrified that the EFF was going to stake a leadership claim on the issue of land redistribution and that was politically unpalatable.
So, we were treated to another dose of populist rhetoric with no clear answers or even a hint to the critical questions of what land, where, how, for whom under what policy and regulatory environments, and with what predetermined outcomes.
While it would be reasonable once again to accept that such details and agendas and policy frameworks could not be explored at Tuesday night’s late briefing, there is a real concern that these details, agendas and policy guidelines do not in fact exist and that the detailed issues of land redistribution and the myriad problems that the whole saga brings to the fore are seriously lagging electoral concerns.
There are several institutions and NGOs who have done sterling and valuable work on the ‘backstage’ issues, problems and complexities of a serious land reform programme that would address the real problems and facilitate real solutions without political grandstanding and empty rhetoric.
These institutions deal with key aspects of a land reform programme and offer various scenarios for taking the entire process forward, but these solutions do not always carry the electoral windfall political parties are seeking to tap into.
There is broad agreement among those organisations serious about land reform that constitutional amendments are not required to facilitate the process, but this detailed practical set of policy initiatives is far less sexy than political posturing on electoral platforms and the late, late press show.
The problem is that the consequences of these press shows are often dire and, given the lack of any context or any reasonable framework in which to place the dramatic announcements, inevitably lead to negative financial and economic consequences and undermine confidence.
There was a chance here for a successful land reform programme that would involve both benefit to our people and a growth of investor confidence in how well the issue was managed. That outcome is now off the table.

Op-Ed: South Africa’s rush into populist politics in a policy vacuum

By Arshad Abba, Global Vice-President of Canback Consulting
In recent months we have seen some confidence return to South Africa&#8217;s market and a mood of optimism in everyday life as we vision a new dawn under the leadership of President Cyril Ramaphosa. A dark cloud still looms overhead in the form of wasteful expenditure and struggling State Owned Entities (SOEs) that have emptied the coffers of South Africa and continue to require funding from the government to remain going concerns. Ultimately, this will need to be funded and a large part of this will need to come through taxes.
In releasing the budget in February this year, government took a brave step to increase the VAT rate, that will have far reaching consequences for both rich and poor. Although this has been positive from an investor perspective, is this something the consumer can afford along with other sin taxes including a newly released sugar tax?
Much has been said about the budget, but not much time has been spent in quantifying the impact on consumers at different income levels. In a society like South Africa with high disparities between rich and poor, income elasticity plays an important part where any increase in price has an almost immediate impact on buying behavior, with consumers especially at the lower levels switching to cheaper products of possibly inferior quality or stopping buying products from that category at all.
In analysing buying behaviour it is important to understand consumption patterns across different socio- economic levels, as this defers significantly. This is summarised below:
<img loading="lazy" decoding="async" class="alignnone size-full wp-image-308090" src="http://cnbc.africa/wp-content/uploads/2018/05/Canback-graphic-1.png" alt="" width="745" height="458" />
Source: ILO, C-GIDD, Canback Consulting
The marginalized population (Average Annual income below R26,000), making up more than 50% of SA society, spend about 35% of what they earn on food and beverages. Over 50% of their income is spent on basic goods. The graph above highlights the great disparity between rich and poor in buying behavior, driven by income levels and affordability.
In further analysing the impact of the budget, using Stats SA data for consumption expenditure, further breakdown through our analysis into the socio-economic classes we concluded that in percentage terms the average impact across all levels is about 5.6%. This is a further 40% increase to the impact of inflation (4%) data released for February 2018. The impact across socio-economic levels is highlighted in the table below:
<table width="601">
<tbody>
<tr>
<td width="236"> Socio economic levels</td>
<td width="163">Impact (%)</td>
<td width="112">Inflation</td>
<td width="91">Total impact</td>
</tr>
<tr>
<td width="236">Upper and upper middle</td>
<td width="163">2.1%</td>
<td rowspan="5" width="112">4.0%</td>
<td width="91">6.1%</td>
</tr>
<tr>
<td width="236">Middle</td>
<td width="163">1.8%</td>
<td width="91">5.8%</td>
</tr>
<tr>
<td width="236">Lower middle</td>
<td width="163">1.7%</td>
<td width="91">5.7%</td>
</tr>
<tr>
<td width="236">Lower</td>
<td width="163">1.7%</td>
<td width="91">5.7%</td>
</tr>
<tr>
<td width="236">Marginalized</td>
<td width="163">1.5%</td>
<td width="91">5.5%</td>
</tr>
</tbody>
</table>
Source: Canback Consulting
The increases, at the lower end is less than the upper end mainly attributable to a larger consumption of basic foods with a portion of that being zero VAT rated and lower % of expenditure branded goods, including alcohol, tobacco and sugary drinks.
Although it seems the impacts are similar in percentage terms, we should keep in mind that a R55 increase to a consumer for every R1,000 spent for those spending more then 50% of their income on basic needs is far greater than a R 61 increase to a consumer on every R1,000 spent at the higher end where only 12% is attributable to food and beverages
Reducing the impact by removing the VAT impact makes for interesting reading. This is illustrated in the table below:
<table width="608">
<tbody>
<tr>
<td width="239">Socio economic levels</td>
<td width="165">Impact (%)</td>
<td width="113">Inflation</td>
<td width="92">Total impact</td>
</tr>
<tr>
<td width="239">Upper and upper middle</td>
<td width="165">1.6%</td>
<td rowspan="5" width="113">4.0%</td>
<td width="92">5.6%</td>
</tr>
<tr>
<td width="239">Middle</td>
<td width="165">1.4%</td>
<td width="92">5.4%</td>
</tr>
<tr>
<td width="239">Lower middle</td>
<td width="165">1.3%</td>
<td width="92">5.3%</td>
</tr>
<tr>
<td width="239">Lower</td>
<td width="165">1.2%</td>
<td width="92">5.2%</td>
</tr>
<tr>
<td width="239">Marginalized</td>
<td width="165">1.0%</td>
<td width="92">5.0%</td>
</tr>
</tbody>
</table>
Source: Canback Consulting
This will reduce the impact by about 10% of the total impact, or excluding an inflation increase it will reduce the impact on the consumer by one third (33%). This highlights its significance in the budget impact. Coupled with the recent price increase on fuel, with prices over time being passed on to consumers we can expect 2018 to be a tough year for the consumer, that would impact an already stuttering economy trying to get going again.
Lower to medium end consumers will struggle to absorb the latest budget and further increases may have dire consequences for them. South Africa can not afford any more slip ups and expect to pass on this cost to the consumers through budget increases.
For this to materialise policy changes is necessary. This includes a commitment to improving education at all levels and ensuring accessibility to grow the workforce, a firm commitment from government that it will not fund inefficiencies by acting as lender and guarantor of last resort to State owned Entities (SOEs), reducing the public sector wage bill with salaries for government employees at 35% of expenditure, , improving governance and fiscal discipline within the public sector and at SOEs, instituting reforms across SAs most important sectors to drive investment and transformation; and creating a business conducive environment within the private sector to ensure ease of doing business mainly for small to medium enterprises (SMEs).
The government’s inability to address these items in future will further impact confidence and the economy and drive up tax rates for consumers.

SA’s budget reforms, what the real impact will be for South Africans

By Nazmeera Moola, co-Head of Fixed Income, Investec Asset Management
After the euphoria of South Africa&#8217;s President Ramaphosa’s SONA, the 2018 Budget speech due tomorrow will bring South Africa down to earth with a bit of a bump.  The President said that hard choices will be needed – but making hard choices in five days is a big ask!
After spending a week immersed in the details of the budget, I’ve come to a few conclusions:
<ol>
<li>A higher growth trajectory solves most ills.  South Africa’s growth forecasts were moved dramatically lower between the February 2017 Budget and the October 2017 MTBPS.  This was due to the sluggish growth outlook and weak revenue collection.  With some real chance of structural reforms after the change in president, it looks possible that growth moves back to 2.5% in 2020 and 3% in 2021.  This is still below the Treasury’s forecasts from February 2017, but will be enough to stabilise the growth outlook.</li>
<li>Around R45bn of tax hikes and spending cuts are needed in the fiscal year that starts 1 April 2018 to stabilise the South African fiscal outlook.  With free tertiary education weighing on the fiscus, it will be difficult to achieve the R31bn in expenditure cuts that were planned.  At most R15bn is likely.  Therefore, tax hikes of around R30bn are needed.  Last year, personal income taxes (PIT) bore the brunt of the adjustment, with very little offset provided for inflation in the tax brackets.  As a result, households earning from R350 000/annum saw a decline in real wages due to limited tax relief for inflation.  While that maneuver can be repeated this year, it is woefully inefficient – and did not raise nearly the amount of expected revenue in 2017.</li>
<li>A far better option is to hike VAT by at least 1%. Tax increases are always an emotive subject.  Value Added Tax or VAT is particularly so.  The main argument against an increase in the VAT rate is that this tax is regressive.  A regressive tax is one where the proportion of an individual’s income expended on that tax falls as they progress up the income scale.  The reasoning is that since lower income earners spend a greater proportion of their income on goods and services and save less, they also spend a higher share of their wages on VAT than lower income earners.</li>
</ol>
While this is true in developed markets, in South Africa, the situation is a bit more nuanced.  A February 2015 study by Ingrid Woolard and a few colleagues published in the World Bank paper titled The distributional impact of fiscal policy in South Africa, shows that VAT in South Africa would be regressive in the absence of the zero-rated food items.
The authors found that VAT is broadly neutral in South Africa.  This means that households across the income brackets pay roughly the same proportion of their income on VAT.  The conclusion is that VAT does not make inequality better or worse in South Africa.
With the inclusion of zero-rated goods, VAT becomes slightly progressive.  This means that higher income earners pay a slightly higher proportion of their income on VAT when zero-rated goods are taken into consideration than lower income earners.    This can be expanded by further increasing the zero rated items.
Moreover, work by the Davis Tax Committee found that a hike in VAT has the smallest negative impact on overall growth and job creation – relative to measures required to raise the same amount of revenue from corporate and/or personal income tax hikes.
As an aside, the authors also found that excise duties are regressive – this was because poorer households expend a greater proportion of their spending on cigarettes and alcohol.  A 1% increase in VAT would raise extra revenue of ZAR23bn.  The conclusion is that the least bad option for South Africa in February 2018 is a VAT hike.

#Budget2018: Why hiking VAT might not be such a bad idea

Roger Southall, University of the Witwatersrand
Rumours that President Jacob Zuma has instructed the South African National Defence Force to draw up plans for implementing a state of emergency may or may not be true. Nonetheless they are evidence of South Africa’s febrile political atmosphere.
<img loading="lazy" decoding="async" class="aligncenter wp-image-294817 size-full" src="http://cnbc.africa/wp-content/uploads/2017/12/Cyril-Ramaphosa-GettyImages_RZ.png" alt="" width="850" height="566" />
But any assumption that the election of Cyril Ramaphosa as the new leader of the African National Congress (ANC), after winning the race against Nkosazana Dlamini-Zuma, will place South Africa on an even keel are misplaced. Indeed, the drama may only be beginning.
It’s useful to look back to 2007 when President Thabo Mbeki unwisely ran for a third term as ANC leader. His unpopularity among large segments of the party provided the platform for his defeat by Zuma at Polokwane. Within a few months the National Executive Committee of the ANC latched onto an excuse to ask Mbeki to stand down as president of the country before the end of his term of office. Being committed to the traditions of party loyalty he complied, resigning as president some eight months before the Constitution required him to do so.
The question this raises is whether South Africa should now expect a repeat performance following the election of a new leader of the ANC. Will this lead to a party instruction to Zuma to stand down as president of the country? And if it does, will he do what Mbeki did and meekly resign?
There’s a big difference between the two scenarios: Mbeki had no reason to fear the consequences of leaving office. Zuma, on the other hand, has numerous reasons to cling to power. This is what makes him, and the immediate future, dangerous for South Africa, and suggests the country faces instability.
<h2>Why Zuma won’t go</h2>
It is not out of the question that Zuma may say to himself, and to South Africa, that he is not going anywhere. He is losing court case after court case, and judicial decisions are increasingly narrowing his legal capacity to block official and independent investigations into the extent of state capture by business interests close to him.
With every passing day, the prospects of his finding himself in the dock, facing 783 charges, including of corruption and racketeering, also increase.
Zuma will have every constitutional right to defy an ANC instruction to stand down as state president until his term expires following the next general election in 2019, and the new parliament’s election of a new president. In terms of the South African Constitution, his term of office will be brought to an early end only if parliament passes a vote of no confidence in his presidency, or votes that, for one reason or another, he is unfit for office.
But today’s ANC is so divided that it cannot be assumed that a majority of ANC MPs would back a motion of no confidence, even following the election of Ramaphosa as the party’s new leader.
In other words, there is a very real prospect that South Africa will see itself ruled for at least another 18 months or so by what is termed “two centres of power”, with the authority and the legitimacy of the party (formally backing Ramaphosa) vying against that of the state (headed by Zuma).
<h2>Throwing caution to the wind</h2>
As if that is not a sufficient condition for political instability, we may expect that Zuma will continue to use his executive power to erect defences against his future prosecution. He will reckon to leave office only with guarantees of immunity. Until he gets them, Zuma will defy all blandishments to go. And if he does not get what he wants, he may throw caution to the wind and go for broke.
Hence, perhaps, the possibility that he is prepared to invoke a state of emergency.
The grounds for Zuma imposing a state of emergency would be specious, summoned up to defend his interests and those backing him. They would be likely to infer foreign interference in affairs of state, alongside suggestions that white monopoly capital, whites as a whole as well as nefarious others were conspiring to prevent much needed radical economic transformation. Present constitutional arrangements would be declared counter-revolutionary and those defending them doing so only to protect their material interests.
After a matter of time, such justifications would probably be declared unconstitutional by the judiciary. It is then that there would be a confrontation between raw power and the Constitution. If such a situation should arise, we cannot be sure which would be the winner.
<h2>South Africa’s army</h2>
It is remarkable how little the searchlight that has focused on state capture has rested on the Defence Force. Much attention has been given to how the executive has effectively co-opted the intelligence and prosecutorial service, as well has how the top ranks of the police have been selected for political rather than operational reasons.
It seems to have been assumed that South Africa’s military is simply sitting in the background, observing political events from afar. But is it? Where would its loyalties lie in the event of a major constitutional crisis?
The danger of the present situation is that South Africa might be about to find out.
Were the military to throw its weight behind Zuma the country would be in no-man’s land. Of course, there would be a massive popular reaction, with the further danger that the president himself would summon his popular cohorts to “defend the revolution”.
And South Africans should not assume that Zuma would be politically isolated. Those who backed Dlamini-Zuma did so to defend their present positions and capacity to use office for personal gain. If they were to rise up, the army would then be elevated to the status of defender of civil order.
What is certain is that in such a wholly uncertain situation the economy would spiral downwards quickly. Capital would take flight at a faster rate than ever before, employment would collapse even further, poverty would become even further entrenched.
<h2>Reasons to be hopeful</h2>
Is all this too extreme a scenario? Hopefully yes. There are numerous good reasons why such a fate will be averted.
Zuma’s control over the ANC is waning, as is his control over various state institutions, notably the National Prosecuting Authority. And the country has a checks and balances in place: there is a vigorous civil society, the judiciary has proved the Constitution’s main defence and trade unions and business remain influential.<img loading="lazy" decoding="async" src="https://counter.theconversation.com/content/89248/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" />Even so, it remains the case that what transpires now that the ANC’s national conference is over will determine the fate and future of our democracy. South Africa is approaching rough waters, and a Jacob Zuma facing an inglorious and humiliating end to his presidency will be a Jacob Zuma at his most dangerous.
This article was originally published on The Conversation.

The ANC has a new leader: but South Africa remains on a political precipice

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South Africa&#8217;s real gross domestic product growth rate was 2 per cent in the third quarter of 2017. The largest contributor to growth in GDP in the third quarter was the agriculture, forestry and fishing industry.

Markets, ratings agencies are pricing in a Ramaphosa win – Investec’s Annabel Bishop

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It looks like South Africa&#8217;s political landscape is going remain interesting for the foreseeable future; Dr Makhosi Khosa has created her own party and political analysts have labelled her move as unwise.

Markets have priced in a Ramaphosa win – analysts

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The WGBI is the most used global bond index for both indexation and benchmark purposes and requires at least one rating agency between S&#038;P and Moody’s to assign an investment grade credit rating to the local currency government bonds for inclusion.

Why Goldman Sachs is buying into Ramaphosa’s New Deal

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The ANC is currently marred by the infighting that is categorised the presidential race, but how will this affect the party post the December elective conference?

Mbhazima Shilowa on ANC succession battles

South Africa&#8217;s African National Congress (ANC) is not bound by tradition to elect its deputy as leader, President Jacob Zuma said in an interview broadcast on Sunday, dismissing labour unions&#8217; endorsement of Cyril Ramaphosa.
The ANC, which last year suffered its worst election result since the end of white-minority rule in 1994, is set to choose a successor to the scandal-plagued Zuma by the end of this year.
Ramaphosa and Nkosazana Dlamini-Zuma, the African Union president once married to Zuma, have both been tapped by organisations in the governing alliance to become party leader, but neither has yet declared whether they intend to stand.
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Zuma, who was party deputy before being elected leader in 2007, made it clear that Ramaphosa was not an automatic choice.
&#8220;People say it is a tradition that once you are the deputy president, you then become the president, that is not true,&#8221; Zuma said in the interview with the South African Broadcasting Corporation.
Analysts say a split has emerged in the ANC between those who want a successor loyal to Zuma, and a faction that wants a fresh start under Ramaphosa.
Ramaphosa, who is Zuma&#8217;s deputy both in the party and in government, told supporters on Sunday that the ANC was &#8220;under severe strain&#8221; and suffered from relentless competition for influence and control over resources.
&#8220;We must acknowledge here that there are instances where internal ANC processes have been infiltrated by individuals and companies seeking preferential access to state business,&#8221; Ramaphosa said.
South Africa&#8217;s anti-graft watchdog last year called for an investigation into influence peddling in Zuma&#8217;s government, but the president has denied providing special favours for wealthy friends and wants the watchdog&#8217;s report to be reviewed.
The Congress of South African Trade Unions (Cosatu), which is part of the ruling political alliance and claims to represent 1.8 million workers, said in November that it would campaign for Ramaphosa.
Dlamini-Zuma, who held several cabinet positions before becoming head of the African Union, was endorsed by the ANC Woman&#8217;s League last week and is expected to have the backing of her former husband.﻿

South Africa's Zuma says ANC not bound to elect deputy as leader

South Africa has given credit ratings agencies &#8220;positive news&#8221; in recent meetings, the nation&#8217;s deputy president said on Sunday after announcing a proposal for a national minimum wage.
&#8220;We have made tremendous progress on the labour instability issues,&#8221; Cyril Ramaphosa said.
South Africa faces a possible downgrade to sub-investment grade by ratings agencies next month, with often violent strikes by labour unions a major concern among investors.﻿

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