December 19, 2017 / 12:50 PM / a year ago

Breakingviews - South Africa’s turnaround will come only slowly

Deputy president of South Africa Cyril Ramaphosa reacts after he was elected president of the ANC during the 54th National Conference of the ruling African National Congress (ANC) at the Nasrec Expo Centre in Johannesburg, South Africa December 18, 2017. REUTERS/Siphiwe Sibeko - RC1289F77440

LONDON (Reuters Breakingviews) - The African National Congress is getting change at the top. But South Africa’s turnaround will come only slowly. The ANC, dominant since the first post-apartheid elections in 1994, chose Cyril Ramaphosa to lead the party. That hints at an end to the rampant corruption and economic decline under President Jacob Zuma. Yet the victory was narrow, and reform could be endangered by infighting and much-needed fiscal rigour.

Ramaphosa’s ascent to the party leadership comes at a critical time for South Africa. Since Zuma took power in 2009, the economy has stagnated and debt has doubled to 52 percent of GDP. The country’s fiscal deficit is now more than 4 percent of economic output. The self-made billionaire who campaigned to fight corruption should be better placed to tackle these problems than his opponent to head the ANC, Nkosazana Dlamini-Zuma, who happens to be Zuma’s ex-wife.

Ramaphosa has a tricky path ahead, however. Zuma remains president, and elections are not due until 2019. Ramaphosa could try to throw him out early, as Zuma did with his predecessor - but that took nearly a year. Moreover, Ramaphosa’s ANC win was tight, suggesting neither removing Zuma nor pushing through reforms will be straightforward. Zuma’s faction makes up half of the six most senior ANC officials.

Then there’s South Africa’s parlous fiscal position. Ramaphosa has promised to boost growth, suggesting the economy could grow by 3 percent this year. Yet that may clash with the need to rein in the country’s deficit to keep credit-rating firms and bond investors on side. It doesn’t help that state enterprises may need rescuing, or that Zuma just offered free university education. Nomura analysts reckon the country needs to push up taxes or cut spending by 5.6 percent of GDP over the next three years to stop debt growing. That will be hard with an election looming.

Markets may cut Ramaphosa some slack, particularly if he can show progress, say by shaking up public enterprises. Yet even if he can take control, South Africa’s recovery is likely to be long and difficult.


Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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