South Africa is struggling with weak growth, high unemployment and a slump in investor confidence.
The country’s bonds are rated junk, corruption scandals have shaken its corporate elites and the second biggest city — Cape Town — could run out of water within months.
It’s been a rough ride for Africa’s only G20 economy under President Jacob Zuma, who lost the support of the ruling African National Congress on Tuesday.
Zuma’s nine years in office have been marred by a series of scandals that eroded investor confidence. He has now been officially “recalled” by the ANC, placing him under enormous pressure to resign.
If he goes, the country’s new leader is likely to be Cyril Ramaphosa, a former labor union leader turned wealthy businessman.
Since Ramaphosa’s appointment as president of the ANC in December, the South African rand has gained 10% against the U.S. dollar, reflecting investor hopes that change is imminent.
But he’ll face an uphill task. Under Zuma’s watch, the South African economy sank into recession twice — in 2009 and 2017 — falling behind its emerging market peers.
GDP growth has averaged less than 2% since 2009, one of the weakest rates in sub-Saharan Africa.
George Glynos, managing director, ETM Analytics, says the government needs to go “back to basics” to restore confidence.
Appoint new officials
Changing the cabinet will be important. Removing “Zuma’s cronies and restoring a more meritocratic approach,” is a vital first step, Glynos said.
The minister of finance is under the spotlight. Malusi Gigaba was appointed by Zuma after the president fired his respected predecessor Pravin Gordhan — a move that sent the rand tumbling.
Gigaba and other key ministers could lose their jobs under new leadership.
Clean up corruption
Ramaphosa will also have to clean up the ANC. It’s not just about removing members, but also ensuring there are consequences for corruption.
Zuma had clung to power despite being mired in a slew of corruption scandals, using his presidency as a shield.
Glynos said his refusal to “bow down to his own movement is proof that his motivation all along was self-serving and mostly about self-preservation.”
Overhaul state-owned businesses
State-owned businesses have been tied to corruption scandals, and accused of misusing tax dollars.
Getting them back on track won’t be easy.
Eskom, the state-owned electric company, and national carrier South African Airways may need to be partially privatized.
Keep to a budget
The country’s debt-to-GDP ratio has risen significantly, jumping to over 50% in 2016 from 31% in 2009.
Getting spending under control will be a challenge, especially during a period of slow economic growth. The balance between spending and growth will be watched closely by credit rating agencies.