Where does the economy fit into the latest political ructions in South Africa? The GDP in South Africa today is not only the 'Gross Domestic Product', but also 'Gross Domestic Politics' -- two sides of the same coin!
Because we are in uncharted political waters, with no apparent rules to the game, any assessment, economic or otherwise, is hazardous. Yet there is a great deal at stake.
What is apparent, is that the integrity of governance in South Africa has been increasingly undermined by a series of calamities, ranging from a faction-driven ANC elective conference coming up, to wide-scale corruption, state capture, a weak economy, and botched Cabinet leadership on certain key issues. The Gupta scandal has now even reached British banks.
These problems cut deep into effective policy decision-making at various levels, including economic policy, as well as damaging the image of South Africa abroad.
This increasing lack of direction could not have come at a more inopportune time, given other daunting policy challenges in South Africa. To begin with, whoever takes over the ANC leadership next month will need some fairly big spades to clean out its Augean stables.
South Africa's public finances are also vulnerable, and investor confidence is fragile –– thanks to ongoing political and policy uncertainty, as regularly reflected in the Policy Uncertainty Index produced by North-West University's School of Business and Governance.
It is worrying for private-sector decision-makers, for example, when the new Energy Minister, David Mahlobo, says the numbers given by the Treasury in the recent medium-term budget-policy speech (MTBPS) were "speculation", and that there was now finality regarding the nuclear build.
But what might the forthcoming ANC conference mean for the economy? In itself, there is no serious economic content, so in that area at least, the conference is likely to remain surprise-free. When business and the markets assess current politics in South Africa, it should already be evident that the elective conference has little to do with economics, but everything to do with politics, patronage and power.
After all, the seven candidates come from the same party and are broadly driven by the same ANC policy documents. There is little to chose between them in terms of the substance in overall socio-economic policy.
No candidate is going to rattle the ANC's political base on economic policy. Socioeconomic transformation, inclusive growth, poverty alleviation, land reform and reducing inequality are among the matters that remain both on the ANC's and on the national agenda. Whichever jockey is backed, it remains the same horse.
The crucial political choices, therefore, lie around the issues of combating corruption, eliminating state capture, enhancing accountability and generally promising good governance. These factors are, of course, also significant in our economic environment.
But what matters now is the level of confidence the various candidates project of their ability to remedy the overall situation and to change South Africa's moral compass for the better. It is the quality of leadership that is now paramount.
These are the dominant themes in our body politic, which for the present inevitably trump the purely economic issues. The economic challenges will clearly reassert themselves once the outcome of the ANC conference is known in late December, either as collateral benefits or as collateral damage.
After a new ANC leader is elected, the risks or opportunities for the South African economy will therefore flow from (a) who has won the ANC leadership (b) what the new "slate" or team looks like and (c) the size of the majority. It is important that there should be a decisive majority or mandate for whoever wins.
Factionalism in the ANC requires a clear victory, assuming that the results are accepted. A slim 51 percent majority amid present political tensions is in any case likely to aggravate divisiveness and encourage legal challenges, and not reduce policy uncertainty.
The South African economy is presently in a bad place and the government has regrettably failed to promote growth.
And it is true that markets and business can live with weak policies that are certain, so that they can adapt their business decisions accordingly. What has inhibited business decision-making in South Africa is prolonged policy uncertainty, which has already exacted its economic price.
What about the credit-rating agencies? Some of the rating agencies may not wait for the outcome of the ANC conference. On the basis of the fiscal slippage in the MTBPS and the prospects for the main Budget in February, certain agencies may decide to downgrade South Africa further before the end of the year. It is not yet clear which way they will jump, although the omens from Moody's, for example, are not good.
For South Africa the goal must, of course, not be the narrow one of placating rating agencies, but rather to be seen to have forged leadership which implements the "right" policies –– to turn the economy around in ways that also earn the support of the agencies.
That nonetheless means that any new ANC leadership must inspire confidence and have credibility, if investment sentiment about South Africa is to improve. For, as Finance Minister Malusi Gigaba outlined in his MTBPS, the macroeconomic picture is not good and continues to haunt us.
The South African economy is presently in a bad place. Economic growth is expected to be about 0.7 percent this year, rising to about 1.2 percent in 2018; unemployment remains unacceptably high; our public finances have taken a bad knock; and the National Treasury faces the dilemma of wanting to avoid a "debt trap" while simultaneously trying to escape a "low-growth trap".
The government has regrettably failed to promote growth. Professor Gavin Keeton of Rhodes University recently highlighted the irony of Thabo Mbeki's previous so-called "failed" –– but more business-friendly –– policies being replaced a decade ago by a strong emphasis on greater government intervention.
It was said then that this would promote faster growth and more rapid job creation. Instead, the changed approach has unfortunately not delivered results.
That said, the present deteriorating socioeconomic realities will still confront a new ANC leader after December and will need to be energetically tackled. In the Budget in February 2018, Finance Minister Malusi Gigaba will have to decide –– if government spending cannot be further controlled –– what options are open to him to increase taxation.
The risk that South Africa will drift into a negative "tax-and-spend" cycle, unless we can get the economy on to a much higher growth path, is high. The 2018/19 Budget will require particularly careful political and economic handling, especially with the 2019 general election a year closer. Both internally and externally, South Africa's economic performance and prospects will be more critically assessed by various stakeholders more than ever before.
For the time being, political and policy uncertainty thus remains the "new normal" in South Africa. Business has apparently developed coping strategies to manage and deal with the situation, so as to keep the economy ticking over. But the longer-term outlook will be governed by the outcome of the ANC conference and will be highly significant for future growth and employment prospects.
Hence the fact that, against all precedent, Standard Bank has nailed its colours to the mast by backing Deputy President Cyril Ramaphosa against Ms Dlamini-Zuma, shows how deeply worried major corporations are about the ANC elective conference. It is a high-risk stance for the bank to take, in a business constituency that normally eschews party politics.
The markets and business will therefore generally be looking to see whether the ANC selects a new leader who can take the big policy decisions, will implement structural reform, and bring unity of purpose to the top of government.
All the upheaval and uncertainty around the ANC's elective process may no doubt in retrospect be deemed worthwhile if the new leadership that emerges can indeed move South Africa towards a bigger, stronger and better economy.
Raymond Parsons is a professor at the NWU School of Business and Governance.Suggest a correction