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RON DERBY: Will Cyril be 'Iron Man' of SA politics?

12 May 2019 - 00:05 By Ron Derby

Of all the presidents to date, Cyril Ramaphosa will probably have the most political space to shrink the government's hand in the South African economy, and it starts with reviewing the strategic importance of the more than 700 state-owned enterprises.
In that review, which is perhaps his most important area of business when he officially starts his term, because of the fiscal pressures, he'll have to consider the full privatisation of some. And in more strategic sectors, such as energy, he'll have to at the very least consider "partial" privatisation to bring in much-needed capital injection.
Such conversations in the administration of former president Thabo Mbeki were at the heart of the ideological battles he had with ANC alliance partners in the SACP and labour federation Cosatu. A struggle that would, in the end, lead to the succession of Jacob Zuma and to what everyone now admits were nine wasted years.
I imagine that this must have been the state in which that "liberal champion" Margaret Thatcher came to power in the UK at the end of the seventies.
After the boom years following the end of World War 2, Thatcher took over a complacent country that had just emerged from a decade during which inflation had reached almost 30%, there were two crippling mining strikes and a humiliating bail-out from the IMF.
In her years at Number 10, between 1979 and 1990, she would follow a policy of deregulation and maintaining a flexible labour market. Along with her colleague across the Atlantic, Ronald Reagan, she'd reduce the power of trade unions, something that now negatively affects both countries as their citizens struggle with low wages while the cost of living keeps rising.
With much zeal, she even privatised water. Markets supported her reforms despite the difficult reform path she had undertaken. It was only in the mid-eighties that her economics seemingly worked for the UK as growth kicked into a higher gear and inflation cooled. It was short-lived, as the nineties opened with the country back in recession.
Minus inflation, which remains in check despite a weak and volatile currency, Ramaphosa faces similar headwinds. And as he shifts position from caretaker president to actual president, investment advisers will be pushing for some of the reforms that Thatcher undertook.
We could say corruption and the "state capture" narrative of the past few years have brought these hard decisions to his table, but I think regardless of the governance crisis of recent years, a decision for or against "Thatcherism" would eventually have to have been faced by an ANC or any other government. Our own goals of recent years have just raised it to crisis levels.
So it's easy to predict that any moves towards an unbundling of state-owned enterprises and the introduction of equity partners in an ailing airline such as SAA would be wholly embraced by the markets. Any such sentiment would see bankers thrilled by the deal opportunities that would be emerging from the main office at the Union Buildings. It's no wonder Goldman Sachs, global deal-maker-in-chief, is such a keen supporter of the New Dawn.
Sending out such a signal would usher in the second-round effects of the "Ramaphoria" we saw after Ramaphosa's victory over Zuma's favoured candidate at the 2017 ANC elective conference.
But in undertaking these reforms one would hope that the pursuit of justice in terms of the distribution of wealth, opportunities and privileges is not in any way jeopardised.
Though we can all agree that the state has overextended itself over the past decade, with debt-to-GDP heading towards that 60% mark that small, emerging-market countries such as ours can ill afford, transforming the economy and dealing with inequality are not something that should be left to the markets.
We tried that stunt with some rather poorly thought-out empowerment deals. The established businesses that didn't need a government licence to operate, such as retailers, did very little or nothing at all for the cause of transformation.
When I think of Brexit and the political chaos it has unleashed in the UK, I often wonder whether these are not the ghosts of "Thatcherism" coming back to haunt it - deregulation, the weakening of labour unions as well as the overzealous manner of privatisation feeding into generations of frustrations with the "experts" at Westminster that backed her.
Maybe these decisions were unavoidable at the time, but we should always consider their consequences, as should Ramaphosa.
• Derby, a former Business Times editor, hosts Power Business on Power FM..

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