Under The Radar: Deadly clashes in South Africa highlight ANC failure

Under The Radar: Deadly clashes in South Africa highlight ANC failure

South Africa is suffering from a wave of violence that highlights widespread dissatisfaction in both the country’s leadership and their economic stewardship.

After more than twenty years, the African National Congress (ANC) is facing serious challenges to its legitimacy in the run-up to local elections in August. Since Mandela’s tenure, the ANC has become increasingly mired in cronyism, corruption, and political infighting. From Thabo Mbeki’s ineffectual, and embarrassing handling of the country’s AIDS crisis, to Jacob Zuma’s charges of rape, corruption, cronyism, and embezzlement, South Africa has not been well-served by its leaders.

Pretoria burns, while the ANC covers its ears

The ANC’s leadership has become increasingly disconnected from voters, having fallen into the trap of patronage, and unwilling to promote grassroots efforts to rejuvenate the party. This in turn has led to deadly riots in Pretoria this week, as ANC supporters of the incumbent mayor of Tshwane municipality, Kgosientso Ramokgopa, set fires, looted, and destroyed municipal vehicles. Supporters of Ramokgopa are angry that the ANC leadership has ignored their wishes regarding the local candidate, having selected former agriculture minister Thoko Didiza, who is not a local of the area.

While the ANC leadership has described the protesters as ‘criminal elements’, civil society organizations insist that the protesters are “mostly ANC members and supporters who have been dissatisfied for some time now by the lack of local democracy.” President Jacob Zuma has remained quiet on the issue, despite earlier protests in the area complaining about poor delivery of services.

To add further fuel to the fire, protestors and looters in Pretoria have – fueled by severe national unemployment – disproportionately targeted foreign-owned stores, blaming foreigners for taking local jobs. This combination of political and economic dissatisfaction is a serious threat to the ANC, which is at risk of losing its majorities in many urban areas, including Pretoria, Johannesburg, and Port Elizabeth. Recent polling by Ipsos also shows the ANC trailing the Democratic Alliance (DA) by five points among likely voters.

To add to the ANC’s woes, Zuma was recently found guilty of breaching the constitution by ignoring a court order to reimburse $16 million in state funds he had used to renovate his private home. Zuma is also facing a legal review by the High Court, which has questioned the 2009 decision by the National Prosecuting Authority to set aside 783 corruption charges against Zuma, allowing him to run for president.

President Zuma undermines business confidence

Zuma’s series of scandals and insufficient efforts to tackle South Africa’s problems has seriously impacted the country’s economic fortunes. Indeed in May, according to the South African Chamber of Commerce and Industry, investor confidence reached the lowest level since the end of apartheid in 1994.

Zuma’s handling of its cabinet has also hurt investor confidence, especially after the surprise firing of finance minister Nhlanhla Nene in December 2015, which resulted in the Rand depreciating sharply against the the Dollar. Moreover, Zuma’s animosity with current finance minister Pravin Gordhan – widely seen as an anti-corruption campaigner – only further destabilizes South Africa’s outlook.

It is thus unsurprising that S&P and Fitch have both threatened to downgrade South Africa’s credit rating to junk if the situation deteriorates further: currently both agencies rank the Rainbow Nation as BBB-.

South Africa faces recession amid low commodity prices

The state of South Africa’s politics would be a major risk in any country, yet the ANC’s ineffectual leadership poses an even greater risk in a country suffering an economic downturn. South Africa’s economy shrunk by 1.2% in Q1 2016 compared with Q4 2015. This was a far larger than expected downturn, leading to a year-on-year decrease of 0.2%. Alongside 6% inflation, South Africa’s agricultural sector decreased by 6.5% due to back to back droughts in recent years.

The main culprit behind South Africa’s poor economic showing is the mining sector, which has seen an 18.1% decrease due to the end of the commodity super-cycle and industry troubles surrounding worker relations, unions, and pay disputes. In other words there has been a $27 billion collective net loss for South Africa’s top forty mining companies, with market capitalization falling by 37%, thus wiping out all the gains from the recent commodity super cycle.

The mining sector highlights the interplay between South Africa’s political and economic failings, as price drops threaten some 32,000 jobs. This has caused unrest due to the government’s inability to provide adequate social safety nets, coupled with poor investor confidence and a dearth of FDI. Accusations of insufficient rule of law and regulations can also be laid at Pretoria’s feet, as a turf war is ensuing between rival mining unions in the platinum sector. South Africa is world’s largest platinum producer, yet in recent months, members of the National Mineworkers Union (NUM) have been killed in clashes with rival union Association of Mineworkers and Construction Union (AMCU) at the Zondereinde Mine.

Concerns over safety have led NUM workers to strike, costing the mine over $1 million in lost revenue a day. Workers are demanding better protection and an investigation into the latest killings in a long string of violence in the platinum industry. Worker safety and infrastructure concerns are also top of mind, especially since the Eskom fiasco highlighted the country’s broken grid.

With upcoming local government elections in August, the ANC is facing challenges from both its traditional urban bases, as well as more rural agricultural and mining workers. Failure to address the concerns of the mining unions will not only lead to a loss of revenue, but could deliver large, angry voting blocs to opposition parties.

Efforts by the ANC to make South Africa’s economy more nimble, have been unsuccessful due an ossified Congress clogging the works. Monopolies are bad for business and politics: after all the ANC was supposed to build a democracy, not a dynasty.

Under the Radar uncovers political risk events around the world overlooked by mainstream media. By detecting hidden risks, we keep you ahead of the pack and ready for new opportunities.

Under the Radar is written by GRI analyst Jeremy Lüdi.

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