South Africa is unlikely to adopt policies needed to drive growth and may go down with it

With the infighting in the ruling African National Congress of South Africa, the country may be dragged down by messy politics for years, according to a recent report.

According to South African Institute of Race Relations, one of the country’s leading research institutions, South Africa is unlikely to adopt policies needed to drive growth, investment and job creation for at least several years because of the current power struggle in the ruling party over who will succeed its leader, Jacob Zuma, in December and as president in 2019.

South African Institute of Race Relations noted that “the medium-term view is that any short-term political leadership changes are likely to be more apparent than real and will not deliver fundamental structural reform, weak economic performance will persist and continue to give impetus to a trend of rising levels of protest and declining confidence in the future. In 2019, the ruling party will go into an election facing the possibility of defeat for the first time, opening the way to an extreme spectrum of outcomes.”

The Johannesburg-based institute added that “While the two main ANC leading contenders, Deputy President Cyril Ramaphosa and former African Union Commission Chairwoman Nkosazana Dlamini-Zuma have probably decided in principle to unite and avoid a divisive leadership race that could split the party, they haven’t agreed on who should fill the top posts. Even if a deal is struck, ideological differences, political squabbling and policy uncertainty are likely to endure well after its Dec. 16-20 elective conference.”

Having the most industrialized economy in Africa, South Africa accounts for 35% of Africa’s gross domestic product and is ranked as an upper-middle-income economy by World Bank. With a GDP that is almost triple to $400 million and foreign reserves that has increased from $3 billion to $50 billion, the country’s economy is diversified with a growing and sizable middle class, within two decades of establishing democracy and ending apartheid.

Despite South Africa’s economy expansion at an average of 1.6% a year since Zuma took office in 2009,  his tenure as president has been plagued with series of scandals, inefficient government bureaucracy, restrictive labor regulations, a shortage of educated workers, political instability, and corruption creating challenges to doing business in the country and rocking investors’ confidence. It got worse this year, when two ratings companies downgraded the country’s debt assessment to junk after Zuma fired Pravin Gordhan as his finance minister, and allegations surfacing that billions of rand have been looted from state companies.

However, though criticism of Zuma’s administration has soared, the institute noted that “there is still a moderate confidence that the political infrastructure created around the president will retain much of its influence and could probably hold sway at the December leadership conference if the contest is decided by a vote”.