South Africa: 10 things on Ramaphosa’s economic team to-do list for 2023

Consensus among political analysts and pollsters is that the African National Congress’ (ANC’s) electoral dominance is in decline and could dip below 50% in 2024, when South Africa’s next general election takes place.

That makes 2023 a pivotal year for the Ramaphosa administration and its political future, as it will be a scene setter in determining both voter and investor sentiment going into next year.

The Africa Report takes a look at 10 items the economic team must attend to in 2023.

1. State of the nation address

Government business kicks off when the president delivers the state of the nation address – most likely to be on the first or second week of February.

Ramaphosa will deliver his address while having the cloud of farm-gate hanging over his head. His administration is also struggling to brighten its image after reneging on numerous promises.

Since winning the 2019 national poll, neither renewal in the form of clean governance nor convincing structural economic reforms have been forthcoming.

Ramaphosa’s speech will set the tone for the government’s policy priorities and programmes for the year ahead, and also indicate how the head of state will lead his cabinet.

2. National budget

A week or so after the president’s address, the minister of finance will table the national budget, as per tradition.

Credit rating agencies and the investor community will look for fiscal consolidation and the trajectory of government debt.

Public sector unions will keep a keen eye on pronouncements pertaining to the state wage bill, while the civil society will pay attention to any announcements concerning universal basic income.

South Africa’s sovereign credit ratings and outlook ride on the credibility of the budget.

Moody’s Investors Service and S&P Global Ratings have South Africa’s outlook on stable and positive, respectively. They have maintained sub-investment – also known as junk – ratings of the sovereign’s long-term foreign and local currency debt.

Both rating agencies have noted increasing competing considerations for the fiscus, such as South Africa’s need to weigh debt repayments against the increasing cost of social support.

3. Avoiding FATF greylisting

Two important bills on anti-money laundering and combating terror financing, passed by South Africa’s legislature in December 2022, are awaiting Ramaphosa’s signature.

The country has expedited the legislative process of the two bills to comply with the 40 steps prescribed in the Financial Action Task Force (FATF) Mutual Evaluation Report, with the aim to address the deficiencies identified in South Africa’s anti-money laundering and combating terror financing framework.

The draft laws were tabled by the ministers of finance and police. The National Treasury said in December the enactment of the bills would ensure that the country will adhered to “international best practices in combating financial crimes and corruption”.

South Africa will know in February if it has done a convincing enough job to avoid a greylisting by FATF, which flags deficiencies in combating financial crimes

4. Zondo recommendations

Ramaphosa’s response in October 2022 to the recommendations of the Judicial Commission of Inquiry into the Allegations of State Capture (Zondo Commission) had a lukewarm reception, with critics arguing the action items announced fell short of requirements.

Although the Zondo Commission shed light on the depth of the rot in South Africa’s public sector – accompanied by private sector complicity – and grand scale corruption, some thought the president played it safe in October.

Now that Ramaphosa has secured a second term as party president, there are heightened expectations of far-reaching and bolder measures.

5. Cabinet composition

A cabinet reshuffle seems inevitable.

ANC tradition dictates that the party president and his deputy assume equivalent roles within the government.

With David Mabuza no longer ANC deputy president and Paul Mashatile succeeding him at the December conference, it is inevitable that the former will part ways with the government the latter will join in.

The country’s deputy president is the leader of government business and often steers key programmes. Under the second Zuma administration, Ramaphosa filled this position and was at the forefront of the government’s negotiations on the introduction of a national minimum wage.

Unlike his predecessor, cabinet reshuffles under the Ramaphosa administration have been few and far between.

6. Plan for power cuts

South Africa has been in the grip of one of the longest and most intensive load-shedding spells since the start of the country’s power crisis in 2008.

In July 2022, Ramaphosa cut short a visit to the US after Eskom implemented stage 6 load-shedding. The president unveiled plans aimed at ameliorating South Africa’s power struggle.

The departments of energy and public enterprises are key in the realisation of those plans. The minister of energy sets the regulatory framework, while the minister of public enterprises oversees power utility Eskom.

Eskom implemented load-shedding throughout the holiday period, and there are no signs that this trend will abate in the new year.

7. SOE guarantees

Eskom has the lion’s share of the government’s guarantees to state-owned entities’ (SOEs’) borrowings. This poses a significant risk to South Africa’s financial sovereignty and has necessitated an intervention by the fiscus.

The National Treasury is undertaking a process by which Eskom’s R400bn ($23.3bn) on-balance sheet debt will be restructured. The minister of finance is expected to make an announcement on this when the new budget is unveiled in February.

Eskom is among a handful of SOEs, including Denel, that receive special attention and require further financial assistance from the state.

The government has hinted at firming up conditions attached to SOE assistance to ensure accountability and avoid recurrent requests for financial help.

8. Digital migration

After years of legal battles, which played out from the lower courts to the constitutional court, South Africa has finally set 31 March 2023 as the date the country will switch off its analogue signal.

The minister of communications and digital technologies said in December that the industry has until 27 January 2023 to make written inputs about the impending switch from analogue to digital.

“Analogue switch-off must be concluded without further delay […] to decongest the networks. Some areas have lost network coverage, pushing for a speedy conclusion of digital migration to allow [for] 4G and 5G deployment,” the minister said in December.

9. Social compact

The president said in his February 2022 speech that government, business, labour, and community – collectively referred to as social partners – had 100 days to conclude a social compact “to grow the economy, create jobs, and combat hunger”.

In July, Ramaphosa conceded in his presidential newsletter that “the social compact cannot be a vague set of commitments, but a clear pathway to achieve higher levels of equality, jobs, and common prosperity”.

The president appealed for greater urgency and collaboration instead of finger pointing.

The ministers of employment and labour, trade, industry, and competition, and finance are spearheading engagements with social partners on the compact.

10. Unemployment

The World Bank says South Africa has one of the lowest labour absorption rates among emerging-market.

According to Statistics South Africa’s (Stats SA’s) Quarterly Labour Force Survey, the country recorded an unemployment rate of 32.9% in the third quarter of 2022. The expanded definition pushes that figure to 43.1%.

The economy grew 1.6% in the third quarter of 2022, shows GDP data released by Stats SA in December.

The combination of high unemployment and low growth reinforces South Africa’s economic inequalities. This also highlights the importance of current interventions being enacted in what could be a watershed year for the Ramaphosa administration.