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Whither South Africa? Can Ramaphosa turn the ailing ship around?

Is South Africa really a free country?

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Former President Zuma has become a byword for corruption in South African politics

“South Africa, Africa’s most advanced economy and the smallest of the BRICS nations, has suffered a decade of political and economic mismanagement and massive state theft.”

That’s the view of Lionel Kruger, a director at JCRA, a London-based financial consultancy which specialises in designing large-scale debt and hedging products and assessing global risks.

“It is a country blessed with mineral wealth, and yet one which managed to miss the benefits of the spectacular commodities super cycle up to 2008 due to a hostile mining regulatory environment, Kruger continues.

“GDP growth has remained tepid since its recovery from the 2008 crisis, averaging well below 4% per annum. GDP has once again slumped sharply in the first quarter of 2019, contracting by 3.2% from the previous quarter, the largest quarterly decline since 2009.”

All is not well in the Rainbow Nation, as we’ve known for some time. Its predominance in global gold production has been challenged successfully by China, Australia, the USA, and several South American nations. Its overwhelming dominance in platinum group metals has been undermined by ongoing weaknesses in the platinum price. Botswana to the north is now the world’s major diamond mining hub.

Labour unions remain a force to be reckoned with for any company doing business in South Africa, while Black Empowerment legislation can skew the economics of any financial undertaking and has arguable led to the creation of huge wealth for a limited number of individuals without creating the trickle down effect that was originally envisioned.

But it’s the corruption at state level that really spooks global investors. Some of the actors in government have also benefitted from BEE, but former President Zuma’s almost transparent embrace of kleptocracy set new low standards.

The one saving grace of the one-party state that South Africa has now become, is that the press is still free, and Mr Zuma’s corrupt peccadillos and strange opinions were frequently splashed across front pages.

Good that the press is free, but hardly encouraging to overseas investors. New President Cyril Ramaphosa is a former mining union man himself, so he can be expected to have some understanding of the issues, both commercial and in terms of personnel, surrounding mining. He’s also described, somewhat euphemistically, as a businessman.

No doubt that he is a businessman, but no doubt either that some of his wealth came his way through black economic empowerment.

So there are plenty of mixed messages around as to how exactly South Africa and South Africans should regard themselves in the context of the global economy.

At one end of the spectrum there’s Julius Malema, an extreme left-wing populist who advocates for forcible land redistribution and what amounts to the ethnic cleansing of Afrikaners from properties that they have held for more than 150 years.

At the other end are the likes of Mr Zuma, who’s corrupt, or Mr Ramaphosa, who’s secure in his own wealth, but struggling to turn round a party machine that was founded in the heady days of cold war liberation struggle and is having a hard time moving on. It’s not clear, for example, when or if it will ever relinquish power.

“The much hoped-for economic recovery following President Ramaphosa’s ousting of Jacob Zuma has not materialised as the scale of destruction of the state owned companies Eskom, SAA, SABC, Transnet, Denel, etc., has become almost an impossible challenge,” continues JCRA’s Kruger.

“The new President also faces significant resistance to change from factions within the ANC still loyal to the former President and determined to continue their pursuit of self-interest.”

None of this ever appears in the public commentary of mining companies engaged in economic activity in South Africa, of course. The world continues to be fed on a hackneyed diet of clichés about the “Rainbow Nation” dreamt up in the heady days that followed Nelson Mandela’s release, when it wasn’t entirely clear that all whites were willing to follow FW de Clerk’s lead and give up power.

And mining companies feel obliged to toe this line in order to avoid any PR backlash. Talk of corrupt licensing practices, or the undue influence of BEE partners, or the sidelining of the Khoi-San peoples in BEE deals, is all carried out in hushed and fearful tones.

And that’s how you can really tell that South Africa isn’t a free country – because those that do business there are frightened of the consequences of speaking their minds on the record.

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