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13/12/2017 04:59 SAST | Updated 13/12/2017 10:50 SAST

High-Stakes Play As South Africa Looks Beyond Zuma

South Africa’s future economic and development prospects hinge on the outcome of the leadership vote.

Mark Schiefelbein/ Pool/ Reuters
South African President Jacob Zuma listens to a speech during the Dialogue of Emerging Market and Developing Countries in Xiamen in southeastern China� Fujian Province Sept. 5, 2017. REUTERS/Mark Schiefelbein/Pool

With a few days 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 the backdrop of prolonged controversy around the country's leadership, prompted by scandals in government and widening divisions at the heart of the ruling party.

This has added to 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 hinge on the outcome of the leadership vote.

The ANC 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 challenges that the country still faces. The winner of the contest is likely to become the next president of the country, either in 2018 -- should Zuma step down to pave the way for fresh leadership -- or in 2019 should the ANC win the next election, when Zuma's term must constitutionally end.

Siphiwe Sibeko / Reuters
South Africa's President Jacob Zuma.

For the first time since coming to power, 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 percent, dropping from 65.9 percent in 2009. 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 shaken many of its leaders. A recent IPSOS poll has for the first time shown that the party was supported by only 47 percent of respondents as a further indication of its dwindling public support under Zuma.

For the President, who faces 18 charges on 783 counts 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. 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.

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, with only Moody's keeping the country above junk status of the three major ratings agencies.

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.

However, Moody's has placed South Africa on review for downgrade, and the events of the next three months until next year's budget speech will have an influence on which direction they take. A further downgrade 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 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.

Siphiwe Sibeko / Reuters
Former African Union chairperson Nkosazana Dlamini-Zuma chats with South Africa's deputy president Cyril Ramaphosa .

The two front-runners, Deputy President Cyril Ramaphosa and Nkosazana 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 term 'radical' in his proposal on transformation in anticipation of the fear 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.

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.

I believe there are three possible scenarios for the conference. Of these, I 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 of the markets. The third scenario would see a postponement of the conference or result amid internal wrangling, sending a very negative message to the market.

The next party leader of the ANC will face the monumental challenges of avoiding a split in the ANC, 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.

Rajesh Jantilal/ AFP/Getty Images
Former Head of the African Union (AU) Dr Nkosazana Dlamini Zuma (L) chats with South African Deputy President Cyril Ramaphosa (R).

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.

** Sinethemba Zonke is a Political Analyst in africapractice's Intelligence and Analysis team.