This country profile was published in November 2008 in our annual 'Africa in 2009' issue. The next edition, 'Africa in 2010' will be on sale 23 November 2009.

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Certainly 2009 will be an historic election year, not just the third of the democratic era but also a harbinger of future political dispensations and directions in Africa’s leading economic powerhouse. As before, the ruling African National Congress (ANC) can win the elections with ease, but opinion polls in the wake of President Thabo Mbeki’s sudden resignation in September 2008, and the subsequent departure of half his cabinet, suggested an opportunity for the official opposition Democratic Alliance (DA) to start to close the gap in some urban areas.

The decision of disgruntled Mbeki-ites within the ANC to form a breakaway group produced strong reactions among those loyal to party president Jacob Zuma. The ANC could unite itself around the vilification of Mosioua Lekota and Mbhazima Shilowa, whose breakaway party will require superhuman organisation to make a mark in the polls. Yet the very fact of the new party’s emergence reflected a serious real split within the political hierarchy.

Popular dissatisfaction with the shenanigans within the ANC, which some opinion polls claim is high, could  in any case express itself in would-be voters staying away from the booths, making turnout the key issue in the election. With support for smaller opposition parties unlikely to grow much, the ANC still enjoys a reasonable prospect, despite its internal turmoil, of scoring around two-thirds of the vote once again. The political drama will focus on the ANC itself, on its ultimate choice of a presidential candidate and on how its factions line up around the personalities and the policies. By November, the favourite was still Jacob Zuma, whose lawyers appeared to have ensured that he will not face trial for corruption this side of the 2009 election. The ANC has mooted new legislation to protect incumbent presidents from prosecution, which if enacted, could see Zuma safe from trial for at least another five years.

A Zuma presidency was not yet a certainty as of late 2008. Kgalema Motlanthe was the interim president of the country, picked by the ANC’s all-powerful National Executive Committee (NEC) as its candidate and duly elected by the National Assembly after the NEC unceremoniously ‘recalled’ Mbeki from the job, forcing his resignation. Motlanthe proved a popular choice within the party and country, satisfying those fed up with Mbeki and those wary of Zuma. If he performs well in the pre-election period, there is an outside chance he will be the ANC’s national presidential candidate.

The NEC, elected at the ANC’s national conference at Polokwane in December 2007, has already proved its determination by removing Mbeki from office, against the publicly-given advice of Zuma and Motlanthe, and ruthlessly purging Mbeki’s allies from provincial positions. The NEC and its allies, who lead the South African Communist Party, Congress of South African Trade Unions and the ANC Youth League, have until now been absolutely determined to ensure a Zuma presidency and seem unlikely to change course.

One reason for the backing for Zuma – both from the NEC’s new majority faction and its allies – is ideological, based on the reasoning that, despite their candidate’s smooth reassurances to the international business community about economic policy continuity under his leadership, they will in reality still be able to influence economic policy to tack leftwards. Another reason is more venal. The state has embarked on a massive infrastructure-building programme, creating lucrative sub-contracts. It seems that in at least some instances political connections will play a role in securing tenders.

The business community has already worked out who counts as a good political connection within the Zuma camp, but it is far less obvious who would count in the same way under a Motlanthe presidency. That is a scary prospect for those in the NEC intending to play the role of useful political connections for business, and is a powerful reason why, despite current speculation, there is a strong headwind for a Zuma presidency. 

If Zuma becomes president in 2009, the big economic question will be his choice of finance minister. The incumbent, Trevor Manuel, was one of the ministers who resigned after Mbeki’s sacking, causing a sharp temporary fall in share prices on the Johannesburg Stock Exchange. He was then quickly reappointed by Motlanthe and indicated his preparedness to continue under a future administration, although he also dropped heavy hints that he had been in the same position for too long. If Zuma picks Manuel, already by far the cabinet’s longest-serving minister, that would certainly suggest economic policy continuity.

Real GDP growth is estimated at 3.5% in 2008 (0.9% lower than earlier forecasts), with lower predictions for 2009. Worsening global conditions might reduce growth to 2.5%. This has echoes of a recession, with the features of one for many people, since the main domestic factor lowering growth will be the drastic slowing of a previously substantial surge in consumer demand. Household consumption grew by 7% in 2007, but by only an estimated 2.9% in 2008, and will be still lower in 2009. Much of the growth in consumer demand has been credit-fuelled, and the slowdown can be traced to tightened monetary policy by the Reserve Bank, which hiked the prime lending rate from an average of 10.6% in 2005 to 15.1% in 2008.

Consumer defaults on interest payments, particularly among ‘middle-income’ ($250-700 per month) earners, have risen fast, but may ease in 2009 following an anticipated cut in interest rates. There has been a relentless upward push in interest rates by Reserve Bank governor Tito Mboweni between 2005 and 2008, despite the squeals of pain from the nation’s borrowers, to curb inflation. Inflation burst spectacularly out of its target range of 3-6% in 2008, to an estimated annual average of 11.9%. Much of this increase has been due to a rise in global food and fuel prices, which are expected to ease in 2009, thus helping bring inflation down.

The main factor driving economic growth in 2009, in the absence of much consumer demand, plus a continued subdued performance from manufacturing and mining, will be the state’s infrastructure spending. The spending programme will keep import levels of capital goods high, which will mean the current account balance in 2009 will remain firmly negative, probably near the 2008 level of around 8% of GDP.