A charm offensive by Jacob Zuma may not be enough to dispel deep investor anxiety over whether he will be able to take charge of Africa’s biggest economy even though he has won over some doubters.
Since unseating South African President Thabo Mbeki as leader of the ruling African National Congress in December, Zuma has moved to consolidate his power and tried to improve his image with everyone from investors to the country’s chief rabbi.
But there is no sign that his efforts to prevent his trial for corruption charges in August will pay off. Nor has he given much detail on policy plans that markets fear could mean a swing to the left if he does take over.
The ANC already appears to be hedging its bets to ensure that even if Zuma cannot take office when Mbeki has to step down next year, the new president would at least be someone who thinks along the same lines.
It is to ask Mbeki to bring Zuma’s close ally, deputy party leader Kgalema Motlanthe, into his cabinet. An intellectual who has never sought the limelight, he is seen as a possible candidate for president if Zuma is found guilty.
“The riskiest thing is simply the uncertainty in the country for the next 14 months,” said veteran political analyst Allister Sparks. “We have Mbeki who is a lame duck or dead duck. Zuma may be going to prison and Motlanthe is waiting in the wings.”
The uncertainty raises questions over how effectively the government can deal with damaging power shortages and other major headaches such as crime and HIV/Aids. The difficulties could be compounded by global economic doubts.
“Risks of a global economic downturn would also make investors cautious when assessing Zuma and the risks of investing in South Africa,” said Lucy Bethell, an analyst at Royal Bank of Scotland in London. The rand hit a five-year low against the dollar this week, due partly to global concerns as well as local factors.
South Africa’s current account deficit, higher inflation and expectations of slowing growth are other investor worries. Foreign portfolio inflows fell to 2.9 billion rand (Dh1.3bn) in the fourth quarter of 2007 – the lowest since 2005 – from a previous 33.7bn. There was a net outflow including overseas portfolio investments by South Africans.
Last week, Zuma tried to persuade South Africa’s highest court to block documents being used as evidence against him in the trial on charges of money-laundering, fraud and racketeering. It put off judgment.
Sparks predicts Zuma’s political career will end unless the case is thrown out.“If he goes to trial I do not believe the ANC could contemplate having him as their candidate for the presidency,” he said. “I do not think you can run for president from the prison dock in a court house. It is just not practical.”
Markets are looking for signs that if Zuma does take over, he would be able to keep the economy strong and manage crises like the chronic power shortage that has hurt crucial gold and platinum mining and raised fears of capital flight.
Zuma’s charm offensive has at least encouraged some investors to feel more comfortable with him, despite concerns that his left-leaning union allies will pressure him to steer away from Mbeki's pro-business policies.
“I hear from investors who recently met with Zuma that he is saying all the right things. I think this helps to reassure people about how he would frame economic policy if he is in the driver’s seat,” said Reinhard Cluse, senior Europe, Middle East and Africa economist at UBS bank in London.
“But the closer we get to the [2009 election] people will want more than just punchy slogans. Sooner or later we want clarity.”
While Zuma is seen as a champion of poor blacks who have yet to benefit from economic growth, he is also a product of the failures of Mbeki, who critics say has alienated many ANC members with his aloofness and autocratic leadership style.
“While Mbeki might have kept the business community on his side, he totally alienated the natural support base of any ANC government,” said Professor Ian Taylor of the School of International Relations at the University of St Andrews.
“And this has now stimulated a situation that has spiralled out of control,” he said. For now, Zuma appears to be banking on his charisma.
He courted the traditionally white Solidarity trade union this month, promising its national congress that the minority should not feel threatened by affirmative action. (Reuters)